Why This Carnival Analyst Cut Their Price Target

Although Carnival Corp CCL made progress on resuming cruise operations in the third quarter, the recovery already seems largely priced in, according to BofA Securities.

The Carnival Analyst: Geoffrey d'Halluin reiterated a Neutral rating for Carnival, while reducing the price target from $30 to $29.

The Carnival Thesis: Although the company’s monthly average cash burn rate in the third quarter was better than its prior guidance, this was mainly due to the timing of capital expenditures, d'Halluin said in the note to clients.

“Carnival Plc (CCL) ended the quarter with EUR7.8bn of liquidity and believes this is sufficient liquidity to return to full cruise operations. Encouragingly, voyages for the third quarter were cash flow positive and CCL expects this to continue,” the analyst wrote.

He further noted that management had lowered the future annual interest expense by more than $250 million per annum.

“We update our estimates to reflect updated capacity plans, comments on ship operating expenses (expected to be higher in 2022 vs. 2019, on a per available lower berth day basis, notably given restart expenses) and progress on future interest expenses,” d'Halluin stated.

CCL Price Action: Shares of Carnival had risen by 5.25% to $26.78 at the time of publication Monday.

Photo: Courtesy Carnival