1 Wall Street Analyst Thinks Carnival Stock Is Going to $19. Is It a Buy?

An analyst just reduced his price target for Carnival (CCL -0.49%), but he still thinks investors should come aboard the cruise line operator’s stock.

That view is a popular one, given that the company has recovered well from the hard hit it took during the coronavirus pandemic. Recently, though, its share price is getting dinged. Is the analyst in question right that investors would gain by buying the stock on its recent weakness?

Carnival’s price target was cut, but the buy rating remains

The steadfast bull behind the Carnival take was CFRA Research’s Siye Desta. He cut his price target to $19 per share from his preceding $23, yet he maintained his buy recommendation. That implies a 17% upside over the next 12 months.

The target reduction wasn’t a surprising or isolated move; other analysts cut theirs in the wake of Carnival’s fiscal 2024 Q1 earnings release. This wasn’t because of the company’s trailing performance — it notched new all-time first-quarter highs for revenue and advance bookings. It also managed to grow its top line by a robust 22% year over year to $5.4 billion and narrow its net loss considerably to $214 million.

Rather, the cuts were more related to the recent collapse of the Francis Scott Key Bridge in Baltimore, which Carnival said could cost as much as $10 million on both its non-GAAP (adjusted) earnings before interest, taxes, depreciation, and amortization (EBITDA) and net income across the entirety of this year.

The world wants to travel

$10 million is a significant hit, but I think investors are more spooked by the Bridge collapse’s impact than they should be.

On a big-picture level, travel is still popular, and travel by sea is even more so. People have disposable income to spend and are clearly willing to spend it. Carnival is very effectively taking advantage of this. As long as the economy continues to hum, that trend will last. The company is in the right place at the right time, and its stock definitely feels like a buy to me.

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