Can Carnival Stock Get Back to $72.70 by the End of 2022?

Carnival (NYSE:CCL) stock was up 43% in February. So far in 2021, CCL stock has climbed 23%. While it stumbled in January, it has bounced back admirably. 

Carnival cruise (CCL) ship on the water

Source: Ruth Peterkin / Shutterstock.com

The cruise operator hit an all-time high of $72.70 in January 2018. The halfway point between its share price of $26.5o this afternoon and its all-time high is nearly $50. 

A month ago, I wouldn’t have thought that CCL stock could approach $50 by the end of 2021. Now, with vaccines rolling out faster, that possibility seems much more realistic. If Carnival gets anywhere near $50 by the end of this year, I don’t think there’s any question it’s got a shot at hitting $72.70 by the end of 2022. 

Before the Pandemic, CCL Stock Was Trending Higher

There is no question that Covid-19 literally and figuratively took the wind out of Carnival’s sails in 2020.

For 2019, Carnival reported that its record annual revenue had jumped 10% to $20.8 billion. Its 2019 net income, excluding certain items, came in at $3.0 billion. Its earnings per share rose 3.2% year-over-year, while its net margin was 15%. 

Carnival was heading into 2020 with confidence. For that year, the company had expected its net cruise revenue, excluding currency fluctuations,  to climb 5%. It provided guidance for a 6.6% increase in capacity. 

“Despite the negative impacts from the tail effect of the high number of unusual events in 2019, as well as a continuation of the negative headwinds facing our Continental European source markets, our brands continue to perform and we are at record booked occupancy levels for 2020 on peak capacity growth,” CEO Arnold Donald said in a statement on Dec. 20, 2019.

If Donald thought the events of 2019 such as Hurricane Dorian were unusual, Covid-19 was a once-in-a-lifetime crisis that caused its 2020 revenue to tumble by 73% to $5.6 billion and its loss, excluding certain items, to come in at $5.8 billion. 

Talk about a turn of events. No one could have written a worse script. 

Where to Now?

In February, the company paused several areas of operation. On Feb. 24, Carnival extended the pause of its operations at U.S. ports through May 31, 2021. So, interested cruise-goers won’t be able to get on a boat in America until June. 

This hasn’t hurt the company’s ability to raise new capital. 

On Feb. 22, Carnival announced that it had priced 40.5 million shares of its stock at $25.10 per share. When the company raised $2.5 billion through stock sales at the end of 2020, it said it had enough cash to last 15 months without any revenue, despite burning $600 million per month while its cruises from the U.S. were on hold. 

There is no doubt that the road to recovery has taken far longer than most anticipated. 

In June 2020, InvestorPlace columnist Mark Hake predicted that an economic recovery and vaccines would help boost CCL stock. Hake’s thesis will play out, but not until the summer or fall of 2021.

“Here is what I predict: once a vaccine is developed, CCL stock will be at least 100% to 150% higher than today. It is possible the stock will move slowly to that level,” Hake wrote on June 10, 2020.

“But a much more likely possibility is the stock will spike to that level on any positive news.,” he added, noting investors’ exuberant spirits at that time. 

At that point, CCL stock was trading around $20.50. At the midpoint of Hake’s 100%-150% range, the shares would have reached $46.13. 

As long as there are no further setbacks for the cruise sector in the next several months, I could see Hake’s original projection of $46 playing out by the end of 2021. 

People want to get out and travel. Cruising was “going great guns” before the pandemic. I have no doubt that large numbers of passengers will return to cruises in time.

If that scenario plays out, there is a real possibility of CCL stock hitting $72.70 by the end of 2022.     

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.

 


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