30 years have passed since then Carnival (CCL 6.57%) (DICK 8.42%) shares trade for $6 apiece, but at least one Wall Street professional thinks it’s a potential price target for the world’s largest cruise line operator. Three analysts cut their short-term price targets on Carnival shares to between $8 and $22 on Monday, following a disappointing financial update late last week. The limbo stick moved even lower when Jamie Rollo on Morgan Stanley rose on Tuesday.
Rollo is adjusting his price target from $7 to $6. Its pulse on booking agents shows that customer demand to take a cruise holiday has improved from where it was a few months ago, but its survey’s outlook for the industry is still mixed. It is cutting its final forecasts by as much as 21% after Carnival’s poorly received quarterly report on Friday. A dangerous combination of weak cruise fares and costs rising faster than expected will be problematic on both ends of the income statement. He naturally has an underweight rating on the stock.
Image source: Getty Images.
Troubled sea
Expectations rose heading into last week’s quarterly update. Analysts were pushing their revenue forecasts higher leading up to Friday’s earnings release, and some of Wall Street’s most bullish professionals even suggested Carnival would finally turn a profit in 10 quarters. successive deficit.
It didn’t turn out that way.
Carnival did not deliver the $5 billion in quarterly revenue that analysts had predicted. Revenues for the seasonally strong fiscal third quarter of $4.31 billion would have fallen 34% below what they were in the final pre-pandemic summer quarter of 2019. The market had expected Carnival’s quarterly loss to contract to $0.13 per share — again, with some carnival trackers donning rosy spectacles and expecting a full profit — but that too turned out to be too ambitious. The bellwether cruise line would continue to dish out $0.65 a piece of red paint. The streak of quarterly deficits wasn’t the only problematic trend that plagued Carnival.
| EPS (Calculation) | EPS (current) | Surprise | |
|---|---|---|---|
| Q3 2021 | ($1.25) | ($1.55) | (24%) |
| Q4 2021 | ($1.27) | ($1.52) | (20%) |
| Q1 2022 | ($1.00) | ($1.57) | (57%) |
| Q2 2022 | ($1.14) | ($1.63) | (43%) |
| Q3 2022 | ($0.13) | ($0.065) | (354%) |
Data source: Yahoo! Finance.
Carnival has consistently missed Wall Street’s profit targets for more than a year. It’s not the first time the cruise line industry has missed the travel boom. With everyone from theme park operators to airlines seeing a boost this summer — “revenge travel,” they called it, as people tried to make up for wasted vacations during the pandemic’s darkest days — cruise lines failed. . Carnival certainly fared better than last summer, when most of its fleet was still not taking passengers, but the recovery has been slow for the industry.
Carnival and its peers have relaxed vaccination and testing requirements in recent weeks, but it may be more than that keeping people away. Carnival noted Friday that cumulative advance bookings for the fourth quarter are below historic levels, despite more encouraging trends looking out to 2023. With the global economy now troubled, the money some sailors were saving for future voyages will now pay bills more urgently. Throw in the current climate of rising interest rates, and it could also be troublesome for Carnival, with its total debt exceeding $35 billion. The long-term outlook may be promising, but Carnival’s weak ratio and sharp short-term outlook make it difficult to pass the next port of call.
