Trump-Zelensky meeting ahead, Fed rate outlook in focus - what’s moving markets
On Thursday, Morgan Stanley (NYSE:MS) analyst Jamie Rollo revised the investment firm's stance on Carnival Corporation (NYSE:CCL), changing the stock's rating from Underweight to Equalweight, albeit with a reduced price target of $21.00, down from the previous $25.00. Rollo's assessment pointed to a changed perspective on the risk-reward balance for Carnival, noting that the potential gains and losses now seem more evenly matched. With a market capitalization of $25.7 billion and a P/E ratio of 12.2, Carnival currently trades near InvestingPro's Fair Value estimate. According to InvestingPro data, 9 analysts have recently revised their earnings upwards for the upcoming period.
The upgrade comes after a reassessment of the macroeconomic outlook which previously underpinned Morgan Stanley's Underweight rating. Rollo highlighted that cruise stocks, including Carnival, have seen a significant drop from their year-to-date highs, averaging a 41% decline. Despite this, the stocks have not reached the lows of past downturns, which ranged from 60% to 80%. InvestingPro data shows the stock has demonstrated significant volatility, with a beta of 2.42 and a notable 13.5% return over the last week, despite a YTD decline of 21.3%.
Rollo also outlined potential outcomes for Carnival's stock under various scenarios. In the event of a recession, the preference would be to steer clear of the cruise sub-sector entirely. Morgan Stanley's bear case, which assumes a 2% yield decrease, suggests that Carnival's earnings per share (EPS) could approach zero and its leverage could increase to 7x. Conversely, in a more bullish scenario, stock prices could see an increase of up to 125% to 156%, reaching new targets of $37 and 2,900p. The company's current financial health shows promise, with revenue of $25.4 billion and a healthy gross profit margin of 54%. Get deeper insights into Carnival's financial metrics and more exclusive ProTips with InvestingPro.
The analyst's comments reflect a cautious approach to the cruise industry's prospects amid economic uncertainty. While acknowledging the potential for a positive turnaround, the firm also recognizes the significant downside risks present in the current environment.
Investors will likely monitor Carnival's performance closely, as the company navigates through the challenges posed by the macroeconomic climate and the Morgan Stanley's new price target and rating adjustment.
In other recent news, Carnival Corporation reported record-breaking first-quarter results for 2025, with revenue increasing by 7.47% to $5.8 billion. Ticket revenue rose by 5.5% year-over-year, reaching $3.83 billion, and onboard revenues increased by 11.1% to $2 billion. Following these results, Tigress Financial Partners raised its price target for Carnival to $32, maintaining a Buy rating. S&P Global Ratings upgraded Carnival's credit rating to 'BB+' due to improved performance, strong bookings, and successful refinancing efforts, which are projected to enhance cash flow and reduce debt. BNP Paribas (OTC:BNPQY) Exane initiated coverage with an Outperform rating and a $26 price target, highlighting the potential revenue boost from Carnival's upcoming Celebration Key launch. Stifel also raised its price target to $31, reiterating a Buy rating, while acknowledging market uncertainties. Meanwhile, Bernstein maintained a Market Perform rating with a $26 target, noting robust demand but highlighting concerns over cost increases and slower growth compared to peers. These developments reflect a generally optimistic outlook among analysts regarding Carnival's financial health and growth prospects.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.