Market Overview

Wedbush Slashes Carnival Price Target Amid Weakness In Continental Europe

Wedbush Slashes Carnival Price Target Amid Weakness In Continental Europe

Carnival Corp (NYSE:CCL) shares fell Friday in the wake of the cruise line's second-quarter report.  

The Analyst

Wedbush analyst James Hardiman maintained a Neutral rating on Carnival and lowered the price target from $54 to $50.

The Thesis

Continental Europe continues to weigh on Carnival’s yield outlook, Hardiman said in a Friday note. (See his track record here.) 

“Given the underperformance of Carnival shares since the company’s 4Q report, we have wanted to get more constructive on the name, and yet the company’s outsized exposure to continental European passengers and the resulting disappointing yield guidance makes the Carnival 2019 story a tricky one," the analyst said. 

Wedbush's lower price target represents modest upside from current trading levels, but not as much upside as Royal Caribbean Cruises Ltd (NYSE: RCL) or Norwegian Cruise Line Holdings Ltd (NYSE: NCLH), Hardiman said. 

“The yield growth guidance coming out of 4Q18 represents a disappointment at the time, with hopes that management was being exceedingly conservative. The unchanged yield guidance following 1Q and this 100 basis reduction adds insult to injury, underscoring just how serious the European issue appears to be for CCL." 

The removal of Cuba as a cruise destination represents a 4-6-cent hit to earnings numbers, and the disruption of Carnival Vista represents an 8-10-cent impact, according to Wedbush. On the positive side, the firm said fuel and currency rates are adding 10 cents to EPS.

Price Action

Carnival shares were down 4.25% at $46.74 at the time of publication Friday. 

Related Links: 

Norwegian Cruise Line's Stock Will Sail Higher, Morgan Stanley Says

Barclays Upgrades Carnival, Says Cruise Lines Are Firm's 'Most Preferred Subsector'

Latest Ratings for CCL

Sep 2020BarclaysUpgradesEqual-WeightOverweight
Aug 2020Morgan StanleyMaintainsUnderweight
Jul 2020HSBCDowngradesBuyHold

View More Analyst Ratings for CCL
View the Latest Analyst Ratings


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