Mizuho maintains Carnival stock Outperform with $32 target

Tuesday, Mizuho (NYSE:MFG) analysts maintained their positive stance on Carnival Corporation (NYSE:CCL) shares, reiterating an Outperform rating with a $32.00 price target. The firm’s assessment underscores the attractiveness of the stock following a recent decline in its price, suggesting a favorable risk/reward balance for investors. According to InvestingPro data, CCL has shown significant volatility with a beta of 2.67, while maintaining a strong 29% return over the past year despite recent pullbacks.

Mizuho’s analysis points to Carnival’s current trading multiples, which are 7.7 times their fiscal year 2025 (FY25) estimate and 6.8 times their FY26 estimate, based on year-end net debt projections for each year. These multiples reflect a discount compared to recent levels, implying that the market may have already accounted for potential downturns in the stock’s price. InvestingPro analysis shows CCL currently trades at an EV/EBITDA of 9.0x, with a P/E ratio of 12.5x. The company maintains a "GOOD" overall Financial Health score, suggesting resilient fundamentals despite market fluctuations. Discover 8 more exclusive ProTips and comprehensive valuation metrics with InvestingPro.

The analysts further elaborate that even in a scenario where the market experiences a downturn or deceleration, they anticipate a support level for Carnival’s stock at around $17. This is based on 7.25 times their projected downside EBITDA, compared to the current price target of $32. Carnival’s robust free cash flow (FCF) is also highlighted as a key factor that may protect the company’s financial health. Estimates suggest that Carnival could generate $2.2 billion in FCF in FY25 and $2.9 billion in FY26, which translates to an approximate 11% yield in FY26. Current data from InvestingPro shows the company generated $1.3 billion in levered free cash flow over the last twelve months, with a healthy gross profit margin of 53.5%.

Additionally, Mizuho has updated its outlook for Carnival to account for foreign exchange (FX) and fuel price changes since the company reported its fourth-quarter earnings for 2024. The analysts believe that both FX and fuel prices will pose minor headwinds in the first quarter of 2025 but may turn into minor tailwinds for the entire fiscal year, relative to the company’s guidance. Looking ahead, InvestingPro analysts forecast EPS of $1.86 for FY2025, with the company’s next earnings report due on March 21, 2025. As a prominent player in the Hotels, Restaurants & Leisure industry, CCL’s comprehensive analysis is available in the Pro Research Report, along with detailed insights for over 1,400 US stocks.

In other recent news, Carnival Corporation has announced a private offering of $1 billion in senior unsecured notes to refinance existing notes due in 2030, aiming to reduce interest expenses. This refinancing effort is part of a broader strategy, as highlighted by Bernstein analysts, who noted Carnival’s proactive debt management, including refinancing $4.78 billion in debt earlier this year. Bernstein maintained a Market Perform rating with a $26 price target, citing potential earnings per share growth from these financial maneuvers. Meanwhile, Stifel analysts have adjusted their price target for Carnival to $30 from $34, retaining a Buy rating due to shifting investor perceptions in the cruise industry. They suggest caution in altering fiscal year 2025 guidance amid current market sentiment.

Additionally, UBS analysts have commented on the cruise industry’s outlook, noting that challenges faced by Norwegian Cruise Line (NYSE:NCLH) Holdings are company-specific and not indicative of broader industry issues, offering a more positive view for Carnival and other competitors. The travel sector has been under pressure, with Delta Air Lines (NYSE:DAL) and American Airlines (NASDAQ:AAL) revising their profit forecasts downward, impacting travel stocks, including Carnival. Despite these challenges, Carnival’s financial strategies and industry-specific insights suggest a nuanced landscape for investors to consider.

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