Analysts at Mizuho initiated coverage of Carnival Corp. (NYSE:CCL) with a Buy rating and $21 per share price target in a note on Tuesday. The firm also named the stock a top pick.
Mizuho revealed its Buy thesis is based on two drivers. Firstly, analysts see upside to estimates through the company's asset sale transformation.
According to the firm, this benefits margins and future earnings growth relative to the company's expectations.
Secondly, Mizuho highlighted the valuation discount to NCLH and CCL's accelerating free cash flow, primarily as capex requirements drop off significantly in 2025 and 2026, relative to NCLH.
"With EBITDA accelerating and Capex requirements declining, we believe CCL's FCF profile is inflecting dramatically, particularly in '25 and '26," wrote Mizuho.
"Our ’24/'25/'26 EBITDA estimates of $5.65bn/$6.22bn/$6.8bn compare to Street $5.69/6.19/$6.54bn," added the firm. "The difference in our estimates vs Street is driven by the asset sale portfolio transformation, which gives us incremental confidence CCL has a path to higher than expected EBITDA."