On Tuesday, Goldman Sachs updated its outlook on Carnival Corporation (NYSE:CCL), raising the price target to $24 from the previous $23, while maintaining a Buy rating on the stock. The firm highlighted several positive trends for the cruise operator, despite some concerns over the latest quarterly guidance.
Carnival's fourth-quarter guidance for 2024, particularly regarding net yield and EBITDA, was slightly below the high expectations of investors, according to the investment bank.
This detail was scrutinized as the company's stock had already seen a significant increase, rising 13% in the past month compared to the S&P 500's 4% gain. This performance suggested that the positive results from the third quarter may have already been factored into the stock's price.
However, the analyst at Goldman Sachs identified three key factors that support a positive long-term outlook for Carnival. First, the company is experiencing robust booking and pricing momentum that is expected to accelerate into 2025.
Second, the number of new cruise passengers increased by 17% in the quarter, which suggests that Carnival's growth is not solely driven by pent-up demand but also by an expansion of the market category.
Third, onboard spending per passenger cruise day (PCD) grew by 6.4% in the third quarter, indicating a strong consumer spending pattern within the cruise industry.
Despite these positive indicators, Goldman Sachs slightly adjusted its non-fuel net cruise costs (NCCxF) per available lower berth day (ALBD) upwards for the year 2025. This adjustment accounts for limited capacity growth, with only one new ship launching late in the year, and the impact of higher dry dock headwinds.
Nevertheless, the firm increased its EBITDA estimates for Carnival for fiscal year 2024 from $5.87 billion to $6.05 billion, justifying the revised $24 price target, which implies a 35% upside potential for the stock.
In other recent news, Carnival Corporation reported a record-breaking performance for the third quarter of 2024. The company's revenues hit nearly $8 billion, a significant $1 billion increase from the previous year.
This robust performance was underscored by a surge in net income of over 60% and a double-digit return on invested capital at 10.5%. Nearly 99% of the company's ticket revenue for the year has been secured, with an anticipated record EBITDA of $6 billion.
In addition to these financial highlights, Carnival Corporation also announced the upcoming launch of the Sun Princess and the new Celebration Key destination, which are expected to support high occupancy and pricing for 2025.
Despite some challenges such as higher than expected fuel costs and occupancy levels remaining below fiscal 2019, the company's future outlook remains positive.
These recent developments illustrate the financial strength and optimistic future outlook of Carnival Corporation, with strategies in place to enhance financial stability and shareholder value.
InvestingPro Insights
To complement Goldman Sachs' analysis, recent data from InvestingPro provides additional context for Carnival Corporation's financial performance and market position. The company's market capitalization stands at $21.2 billion, reflecting its significant presence in the cruise industry. Carnival's P/E ratio of 13.49 suggests that the stock is reasonably valued relative to its earnings, which aligns with Goldman Sachs' positive outlook.
InvestingPro Tips highlight that Carnival is expected to see net income growth this year, and analysts predict the company will be profitable. This supports Goldman Sachs' optimistic view on the company's financial trajectory. Additionally, Carnival has been profitable over the last twelve months, with a revenue of $24.48 billion and a strong gross profit margin of 51.96%.
The company's revenue growth of 22.18% over the last twelve months and 15.2% in the most recent quarter underscores the robust booking and pricing momentum mentioned in the Goldman Sachs analysis. Moreover, Carnival's EBITDA growth of 83.7% in the last twelve months is particularly impressive, indicating significant improvement in operational efficiency.
For investors seeking more comprehensive insights, InvestingPro offers additional tips and analysis, with 7 more tips available for Carnival Corporation on the platform.
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