On a day when the S&P 500 index reached a record high, Carnival Corporation’s (CCL) stock jumped 7%, marking its highest level in over two years. This significant surge speaks volumes about the company’s rebound after being one of the hardest-hit industries during the COVID-19 pandemic. While cruise lines have experienced some solid runs in recent years, reaching pre-pandemic levels has remained elusive. However, the current momentum suggests that some cruise stocks, particularly Carnival, are poised to break through this barrier.
One of the key drivers behind this optimism is the company’s impressive recent earnings report. Released just two weeks ago, the report showcased a remarkable performance. Carnival’s revenue surged over 15% year-over-year, exceeding expectations and setting a new record for quarterly revenue. This strong performance keeps the company on track to achieve its highest-ever turnover by the end of the year. The company’s bottom-line earnings per share (EPS) also surpassed expectations, coming in 10% higher than consensus estimates. This contributed to a record $2.2 billion in operating income, representing a 34% increase from the same quarter last year. This remarkable growth is particularly impressive considering it’s not typical for companies in the technology sector, highlighting the strength of Carnival’s comeback.
CEO Josh Weinstein summed up the company’s outlook, stating, “We are poised to deliver record operating performance for the full year 2024, with adjusted EBITDA now expected to cross $6 billion.” In addition, consistent and robust demand allowed management to increase their full-year yield guidance for the third time in 2024. Weinstein remains confident in Carnival’s ability to maintain this momentum through 2025 and into 2026.
The bullish sentiment surrounding Carnival is not just reflected in its earnings report. The stock’s price action has also been remarkably positive. Although Carnival shares had rallied close to 40% leading up to the earnings report, they experienced a slight dip in early October. This dip, however, was quickly absorbed by investors who recognized the strength of the report, and the stock has been on an upward trajectory ever since. In the past week alone, the shares have climbed nearly 20%, reaching their highest point since April 2022, a full 220% increase from their post-pandemic lows.
The best news for investors is that analysts anticipate further gains for Carnival. Several prominent analysts, including those at Mizuho, Barclays, and Macquarie, have reiterated their Buy rating on Carnival shares and have raised price targets to $26. Tigress Financial and Citigroup have also expressed a similar bullish stance, setting price targets of $28. Considering Carnival shares closed last night at around $20, the analysts’ predictions point to a potential upside of at least 40% from current levels. If Carnival reaches that level in the coming weeks, it would place the stock within touching distance of its post-pandemic high of $31. Although the stock was previously turned back from that level, its technical structure appears much more favorable this time around. Carnival shares have been establishing higher lows for the past two years, and this week’s surge has broken through a significant resistance level at $20.
Based on the company’s strong fundamental performance and the bullish outlook from analysts, it’s difficult to imagine Carnival heading in any direction other than north. The company’s recent successes suggest that it is not only on track for a full recovery but also poised for continued growth and profitability. The future looks bright for Carnival, and investors who are seeking exposure to the rebounding cruise industry may want to consider adding this stock to their portfolio.
