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Carnival Q1 Earnings May Be Disappointing But Shares Rise on Cautious Optimism

Carnival, the world’s largest cruise ship operator, is expected to report a loss for the fourth consecutive time in the fiscal first quarter as the COVID-19 pandemic continues to hurt business operations and global bookings.

But Carnival’s shares, which slumped about 60% in 2020 and rebounded over 30% to $28.60 so far this year, traded 2.31% higher $29.26 in after trading hours on Tuesday.

The Miami, Florida-based company is expected to report a loss of $1.54 per share, worse, compared to a profit of 22 cents per share registered in the same quarter last year. Carnival’s revenue will plunge ​nearly 100% year-on-year to $108 million.

The company did not provide earnings guidance for fiscal 2021 and was unclear as to when its business operations would return to normalcy.

Carnival Stock Price Forecast

Eleven analysts who offered stock ratings for Carnival in the last three months forecast the average price in 12 months of $24.33 with a high forecast of $42.00 and a low forecast of $14.00.

The average price target represents a -14.93% decrease from the last price of $28.60. Of those 11 analysts, four rated “Buy”, three rated “Hold” while four rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $14 with a high of $40 under a bull scenario and $5 under the worst-case scenario. The firm gave an “Underweight” rating on the cruise ship operator’s stock.

“We think the cruise industry will be one of the slowest sub-sectors to recover from COVID-19. Cruising needs not just international travel to return, but ports to reopen, authorities to permit cruising, and the return of customer confidence,” said Jamie Rollo, equity analyst at Morgan Stanley.

“We expect cruising to resume in Q2 2021, and expect FY19 EBITDA to return in FY23 given FY22 will be the first normal year, and pricing will likely come under pressure. FY19 EBITDA implies EPS 60% lower given share issue dilution and higher interest expense. We see debt doubling in FY21 vs FY19 due to operating losses and high capex commitments, and leverage looks high at 5x even in FY23e, so we see risk more equity might need to be raised.”

Several other analysts have also updated their stock outlook. JPMorgan lifted their price objective to $33 from $23 and gave the company a “neutral” rating. Truist raised their price objective to $16 from $14. Citigroup issued a “buy” rating and a $30 price objective on the stock. Credit Suisse Group increased their target price to $18 from $15 and gave the stock a “neutral” rating.

Analyst Comments

“Shares of Carnival have outperformed the industry in the past six months. The company reported fourth-quarter 2020 results, wherein earnings and revenues missed the Zacks Consensus Estimate. Its cruise operations have been halted due to the pandemic. It is also likely to result in delay in ship deliveries. Due to the uncertainty of the crisis, the company is unable to predict the entire fleet’s return to normal operations,” noted analysts at ZACKS Research.

“It anticipates average monthly cash burn in first-quarter fiscal 2021 to be nearly $600 million. The company stated that cumulative advanced bookings for the second half of 2021 are within the historical range. Moreover, bookings for the first half of 2022 are ahead of 2019. Also, it remains optimistic on its innovations featuring PlayOcean and OceanView. Addition of new ship, to its global fleet of Princess Cruises to drive growth.”

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