Citi has maintained a Buy rating on Carnival Corporation (NYSE: NYSE:CCL) and increased the price target to $28 from $25.
The firm highlighted the cruise operator's organic turnaround efforts, which set it apart from its peers who are more focused on acquiring new assets.
The recent third-quarter results have shown promise, indicating that Carnival's growth may surpass investor expectations, which had been previously viewed as a limited "catch-up" trade within the year.
Carnival's performance in the last quarter has been seen as a positive indicator of the company's potential to sustain current demand levels. With a minimalistic order book, Carnival is positioned to potentially achieve higher levels of debt reduction and return on invested capital (ROIC). This perspective comes amid a broader industry context where growth is often driven by the addition of new ships and assets.
The update on Carnival's stock comes as the cruise industry continues to navigate the post-pandemic recovery phase, with many companies seeking ways to attract customers and improve their financial standing. Carnival's strategic approach, as noted by Citi, could differentiate it from its competitors and contribute to its long-term financial health.
In other recent news, Carnival Corporation has reported record-breaking Q3 2024 earnings, with revenues reaching nearly $8 billion and net income surging over 60%. This robust financial performance was accompanied by a series of analyst upgrades.
Tigress Financial Partners increased its price target on Carnival to $28.00, maintaining a Buy rating, while Deutsche Bank sustained its Hold rating with a price target of $19.00. Stifel reaffirmed its Buy rating with a steady price target of $27.00, and Mizuho Securities adjusted its financial outlook, increasing the price target to $26 from the previous $25.
Carnival's strong earnings were attributed to robust demand for cruises and consumer travel spending, with a significant increase in onboard spending and ticket prices. The company also achieved cost savings, with adjusted cruise costs excluding fuel per Available Lower Berth Day (ALBD) declining compared to 2023. Carnival's cumulative advanced bookings for the fiscal year 2025 are already outpacing the previous year's record, with higher prices as well.
The company has been actively expanding its operations and offerings, opening a new Fleet Operations Center in Hamburg, Germany, and announcing the expansion of Half Moon Cay and the introduction of the Pearl Cove Beach Club at Celebration Key. Carnival's digital marketing efforts have paid off, attracting a growing number of new-to-cruise guests and repeat customers. The company is also set to launch the Sun Princess and a new destination, Celebration Key, which are expected to support high occupancy and pricing in 2025.
InvestingPro Insights
Citi's bullish stance on Carnival Corporation (NYSE:CCL) aligns with several InvestingPro metrics and tips that underscore the company's improving financial health and market position. According to InvestingPro data, Carnival's revenue growth stands at 22.18% over the last twelve months, with a robust EBITDA growth of 83.52% in the same period. These figures support Citi's view on Carnival's organic turnaround efforts and potential to exceed investor expectations.
An InvestingPro Tip highlights that 11 analysts have revised their earnings upwards for the upcoming period, which corroborates Citi's optimistic outlook on the company's future performance. Additionally, another InvestingPro Tip indicates that Carnival is expected to be profitable this year, aligning with Citi's assessment of the company's improving financial leverage and operational efficiency.
It's worth noting that Carnival's stock has shown a strong return over the last month, with a 17.72% price total return, reflecting growing investor confidence. This performance, coupled with Citi's increased price target, suggests potential upside for the stock.
For investors seeking a more comprehensive analysis, InvestingPro offers 6 additional tips that could provide further insights into Carnival's market position and financial outlook.
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