Shares of Carnival Corp. cruised toward a 13-month high Monday after two Wall Street analysts turned bullish, saying growing demand is no longer just about a postpandemic recovery.
BofA Securities analyst Andrew Didora raised his rating on Carnival’s stock to buy after being at neutral since June 2020, while JPMorgan’s Matthew Boss raised his rating to overweight after being in the neutral camp for at least three years.
shot up 14.5% in midday trading to put it on track for its highest close since May 2022, enough to pace the S&P 500’s
advancers. It was headed for the biggest one-day gain since it rocketed a record 39.3% on Nov. 9, 2020.
JPMorgan’s Boss said his “key takeaway” from a recent meeting with Carnival Chief Executive Officer John Weinstein was that the company was “no longer riding the coattails of a post-pause pent-up demand,” as demand from different customer types has returned to prepandemic balances, with “new-to-cruise” demand inflecting this year.
“A key point from our meetings — millennials generally led the initial post-pandemic recovery across all travel sectors including within the cruise space,” Boss wrote in a note to clients. “Importantly in explaining the continued demand strength — [management] teams cited a recent inflection in new-to-cruise pointing to sustainability (versus pent-up demand from loyalists seen a year ago),” with new-to-cruise customers back to normalized, prepandemic levels.
Boss was also upbeat about Weinstein’s clearly stated intention not to issue any equity to boost liquidity, as Weinstein reiterated his intent in using excess liquidity to pay down debt.
He raised his price target on Carnival’s stock by about 45%, to $16 from $11.
BofA’s Didora said among his reasons for recommending investors start buying Carnival’s stock is that credit risk has been reduced given that the company has “plenty of liquidity” and debt maturities are “manageable.” He’s also upbeat on how Weinstein has streamlined the company since taking the reins in August 2022 with a focus on revenue generation, and the fact that despite the stock’s recent rally, valuation “is not stretched by any metric.”
He raised his price target by 82%, to $20 from $11.
The stock has soared 54.6% over the past three months, but its 35.6% gain over the past 12 months still trailed the 104.6% run-up in rival Royal Caribbean Group’s shares
and Norwegian Cruise Line Holdings Ltd. stock’s
41.5% rally over the same time period. The S&P 500 has advanced 10.6% over the past year.
Didora still rates shares of both Royal Caribbean and Norwegian Cruise Line at neutral.
While there is some concern over how the macroeconomic environment will affect consumer demand given the recent slowdown in discretionary spending, Didora believes Carnival, as well as the rest of the cruise industry, should remain relatively safe from the slowdown.
“In our opinion, the cruise industry’s long booking window and strong current demand could allow it to be less susceptible to a slowdown in the leisure consumer relative to other areas of travel,” Didora wrote.
Of the 23 analysts surveyed by FactSet who cover Carnival, 12 are now bullish, seven are neutral and three are bearish.