Goldman Sachs Upgrades Carnival, Says Line Is Cruising Toward Growth

Carnival Corp. CCL is cruising along and its stock should be floating higher, according to Goldman Sachs.

The Analyst

Goldman’s Stephen Grambling upgraded his rating on the cruise ship company’s stock from Neutral to Buy with a price target of $65.

The Thesis

Grambling expects Carnival to see net unit growth of around 5 percent over the next three years -– nearly double what it’s been the last three.

One big reason for the wave of optimism? Concerns about European demand slowing are overblown, Grambling said. Even if there’s a drop in European net yield, it would be a small impact on Carnival, he wrote in a note. The market is likely already factoring in the macroeconomics, he said, which helps make Carnival a value right now.

The cruise line is poised for growth because it has grown its fleet in recent years, Grambling said. Over the last few years, the company has gotten rid of older, smaller ships and replaced them with larger, more efficient ones, along with other investments in technology expected to create efficiency.

"With Carnival expecting to accelerate capacity, “we expect stronger top-line growth and corresponding operating cost leverage to support double-digit EPS growth in 2019/2020,” Grambling wrote.