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Carnival Stock Slips; Citi Sees Better Returns at Norwegian

Carnival shares fall as Citi downgrades the company on concern about limited revenue recovery.
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Carnival Cruise Lines  (CCL) - Get Free Report slipped Monday after a Citi analyst downgraded the cruise ship operator to neutral from buy and slashed his price target to $24.50 from $34.

Shares of the Miami company at last check were down 1.4% to $21.98.

Analyst James Ainley said in a research note that while he still believed in a recovery for the cruise industry, his comparative analysis of the pricing environment, ship pipeline, earnings quality, returns and valuation suggested that rival Norwegian Cruise Line  (NCLH) - Get Free Report will deliver more attractive returns to shareholders relative to Carnival.

Carnival has delivered slower revenue and earnings growth over the past 10 years and its decision to exit older, less efficient vessels and smaller pipeline will limit its revenue recovery compared with Norwegian, the analyst said, according to the Fly.

Norwegian shares were up 0.3% to $25.56. The company said earlier this month it would be ready to launch its full fleet by April, the first time it's been at full operation since the pandemic started.

Ainley also downgraded Carnival plc  (CUK) - Get Free Report to neutral with a price target of 17.5 euros, down from 24 euros. 

On Thursday Berenberg analyst Stuart Gordon upgraded Carnival to hold from sell with a $22.50 price target.

The cruise ship industry was  battered by Covid-19, with several outbreaks spreading rapidly aboard numerous vessels.

Last month, Carnival said its voyages for the third quarter were cash flow positive and that it expects the trend will continue. Occupancy was still just 54% overall in the quarter but rose from 39% in June to 59% in August.

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The company reported a monthly average cash burn rate of $510 million, which was better than previous guidance and in line with its $500 million monthly average cash burn rate for the first half of the year.