Carnival Stock Could Make a Comeback As Cruising Becomes More Popular

Carnival Corp (NYSE:CCL) stock is starting to benefit from a rise in the popularity of cruising. People are starting to book their summer cruise voyages and volumes are up. If this continues through the spring, expect to see CCL stock take off.

Carnival (CCL) cruise ship on water in front of beach with chairs
Source: Flickr

For example, on Feb. 7, Carnival’s Cunard divisions, which operates its luxury transatlantic cruise ships (Queen Mary, Queen Victoria, and Queen Elizabeth) reported that it had seen a record-breaking first two days of sales. In fact, the cruise line reported that Cunard’s two strongest booking periods in more than a decade have happened in the last 12 months.

Dampening Bookings or Not

This is different from the picture the company recently painted in its latest 10-K filing for the year ended Nov. 30. The 10-K was filed on Jan. 27 and has the following language on page 4 under “Recent Developments”:

“Since the beginning of our fiscal year, we have experienced an impact on bookings for our near-term sailings, including higher cancellations resulting from an increase in pre-travel positive test results and challenges in the availability of timely pre-travel tests.” 

In addition, the company talked about a “dampening” of its bookings relative to 2019 (i.e., prior to Covid-19) in the last few weeks.

But, this does not mean much. For one, all its books have been lower than those in 2019. Moreover, the company went on to say that it plans on operating 96% of its fleet in the first quarter in what it calls ALBD (available lower berth days).

Bloomberg News made a big deal about this in an article titled: “Carnival Sees ‘Dampening’ in Cruise Bookings for Second Half of 2022.” However, they may have the story partly wrong for the reasons I just pointed out, including the recent luxury cruise bookings news.

Moreover, analysts seem to believe that revenue will be higher this year than last year (ending Nov. 2022). For example, analysts see revenue rising to $16.23 billion this year (to Nov. 30, 2022), up from $1.91 billion in 2021. But revenue was $20.825 billion in 2019, so both of these years show “dampening” from 2019.

What Analysts Say About Carnival

So far analysts are not lowering their target prices for CCL stock. For example, 20 analysts surveyed by Seeking Alpha have an average price target of $26.81, or 15.6% over its price today (Feb. 9) of $23.19. In addition, six of those analysts have a ‘Buy’ recommendation on CCL stock. Moreover, a chart of the average price target shows it has been fairly stable in the past six months.

In addition, TipRanks.com says its survey of 7 analysts who have written on the stock in the last three months is $25.83 per share. That is 11.4% over today’s price.

So every way you look at it, the analyst community is still reasonably positive on the stock. Moreover, they all expect that bookings and revenue will pick up significantly for the year ending November 2023.

Seeking Alpha shows that its analysts forecast a 34.6% rise in revenue to $21.84 billion, up from the $16.23 billion revenue forecast for this year.

What To Do

So there may be a short-term second-half 2022 dampening or not in bookings, which I doubt. But analysts still believe that cruising will become more and more popular over the next two years, pushing up Carnival’s revenue.

Eventually, this feeds into a higher CCL stock price. So value investors who can take a long-term approach may begin taking a stake.

They may see this as an opportune time to get in before CCL stock takes off. By the time it is apparent that revenues have recovered to over the 2019 levels, the stock will be significantly higher. It will be too late to begin investing in CCL stock at today’s bargain price.

On the date of publication, Mark R. Hake did not hold any position (either directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Mark Hake writes about personal finance on mrhake.medium.com and Newsbreak.com runs the Total Yield Value Guide which you can review here.


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