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Carnival Wavers After Upgrade to Buy on Long-Term Optimism

For Carnival cruises, the 'outlook has improved as vaccines become more widespread than what we factored into our estimates last year,' UBS says.
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Carnival  (CCL) - Get Carnival Corporation Report shares wavered on Thursday after UBS raised its rating on the cruise operator to buy from neutral and its target price to $42 from $20 on optimism for the company's long-term prospects.

“While the near-term outlook has gotten worse, with continued delays in restart, the longer-term outlook has improved as vaccines become more widespread than what we originally factored into our estimates last year,” UBS analyst Robin Farley wrote in a commentary.

“As a result, our 2021 and 2022 estimates are lower but our 2023 estimates are higher.”

“Furthermore,” Farley said, “given that CCL includes some brands that source primarily from Italy, Germany and the U.K., and those countries are likely to allow cruising to restart before the U.S., we are bumping up CCL estimates to include more relative recovery than previously.”

She said resumption of U.S. cruising “is now more likely in late Q3 from Q2 previously.”

Carnival Extends Voyage Suspension Through End of May

Carnival stock recently traded at $28.61, off 1.1%. They have traded up on Thursday at as much as $29.50, up 2%. 

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The shares soared 78% in the six months through Wednesday as investors have grown more optimistic about COVID vaccines and economic recovery.

Farley left ratings for Carnival’s main competitors Royal Caribbean  (RCL) - Get Royal Caribbean Cruises Ltd. Report at buy and Norwegian Cruise  (NCLH) - Get Norwegian Cruise Line Holdings Ltd. Report at neutral. 

But she lifted the target prices, to $116 from $79 for Royal Caribbean and to $32 from $21 for Norwegian.

Royal Caribbean recently traded at $89.18, down 2.5%, and Norwegian at $29.58, down 3%

Earlier this week, J.P. Morgan raised its price targets on all three of the cruise giants, based on the prospect of economic recovery from the coronavirus pandemic.

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