Bad news for Carnival Cruise Lines (NYSE:CCL) investors: Carnival bought a new boat. And that particular revelation did indeed come across as bad news for investors, who sent shares down just over 1.5% in the closing minutes of Tuesday’s trading. The cruise line operator placed a new order for an Excel-class boat from the Meyer Werft shipyards in Germany, with an expected delivery date of sometime in 2028.
This is actually the second such order that Carnival placed in the last two months alone, and the Excel is quite a behemoth. It weighs in at 180,000 tons, can carry 6,400 guests and 1,800 crew and runs on liquefied natural gas. Carnival bought the ship as an expression of its “responsible capital approach,” calling on it to use its free cash flow effectively to improve its overall balance sheet, as well as reduce its debt load to get more value to the shareholders.
Overestimating the Market?
It’s a safe bet as to why Carnival stockholders weren’t happy about this move. We know that the economy is not in the best shape these days; anyone who’s tried to buy either food or gas in the last two weeks knows that much. So, for Carnival to shell out big money on a huge new boat might not be a good play. However, it’s worth noting that the boat won’t actually see service until 2028, so by then, who knows what the economy will look like?
Trying to guess that far out is notoriously problematic, so give Carnival some credit for not being short-sighted. After all, the Jacksonville Port Authority just set up a new deal with Carnival to add a cruise line service from Jacksonville. So, that offers a little more confidence in the cruise sector for at least the short term.
Is CCL a Good Stock to Buy Now?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on CCL stock based on nine Buys, one Hold, and one Sell assigned in the past three months, as indicated by the graphic below. After a 91.75% rally in its share price over the past year, the average CCL price target of $19.08 per share implies 12.4% upside potential.
