On Monday, CFRA made adjustments to its outlook on Carnival Corporation (NYSE:CCL), reducing the 12-month stock price target from $23.00 to $19.00, yet reaffirming a Buy rating on the stock. The revision reflects a new target price based on 9.8 times the forecasted FY24 (November) enterprise value/EBITDA, which aligns with the historical trading range of 8 to 11 times. The target adjustment is set against an anticipated adjusted EBITDA of $5.6 billion for FY24.
The firm has maintained its FY24 earnings per share (EPS) estimate at $1.01, while increasing the FY25 EPS projection to $1.40, up from the previous $1.33. Carnival reported a Q1 adjusted EPS of ($0.14), slightly outperforming the consensus by $0.04.
Revenue for the quarter reached $5.407 billion, marking a year-over-year increase of 22.0% and aligning with general market expectations. The company's adjusted EBITDA showed growth, reaching $871 million compared to the $837 million market consensus, with its margin expanding to 16.1%, although this was lower than the 19.3% margin in FY 2019.
Carnival has raised its full-year guidance for both adjusted EBITDA and net income in FY24, following another record-setting period for bookings and customer deposits. Despite this positive outlook, there are anticipated challenges due to the collapse of the Francis Scott Key Bridge and necessary reroutings in the Red Sea, which are expected to negatively impact FY24 performance.
Additionally, there are ongoing concerns about a potential decrease in cruise travel demand in the latter half of FY24 and the company's leverage.
Nonetheless, the price gap between cruise and land-based vacations continues to be a competitive advantage for Carnival. The company has also experienced revenue growth across its American and European brands and is planning new fleet investments, including the AIDA Evolution.
InvestingPro Insights
In light of CFRA's recent adjustments to Carnival Corporation's outlook, it's valuable to consider the latest InvestingPro data and tips. Carnival's market cap currently stands at $2.43 billion, with a forward P/E ratio for the last twelve months as of Q1 2024 at 37.67, indicating investors may expect earnings growth. The company's revenue growth is also notable, with a 50.66% increase over the last twelve months as of Q1 2024, reflecting Carnival's recovery trajectory in the post-pandemic era.
InvestingPro Tips suggest Carnival is trading at a low Price / Book multiple of 3.08, potentially indicating the stock is undervalued compared to its assets. Additionally, analysts have highlighted Carnival as a prominent player in the Hotels, Restaurants & Leisure industry, with a high return over the last year of 60.99%. This aligns with CFRA's Buy rating, despite the recent price target adjustment.
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