Shares of Carnival Corporation (NYSE:CCL), the prominent cruise line operator, are soaring at the time of writing. This can be attributed to an upgrade from Hold to Buy by Jefferies. Analyst David Katz cites the company’s promising turn towards bolstering cash flow, reducing debt, and expanding equity as key factors for this rating change. Carnival projects an average of $5 billion in operational cash over the next three years and aims to utilize an average of $3 billion of adjusted free cash to decrease debt up to 2026.
Katz further forecasts positive dynamics such as falling fuel costs and enhancements to the operating model, all of which could pave the way for Carnival’s return to investment-grade metrics. He asserts that the combined effects of leadership transformation, supply and demand recovery, and a capital repositioning from debt to equity can significantly impact the company’s equity value. Katz believes that the transformation of Carnival from a good trade to a long-term investment is still a path that lies ahead. This transition could result in Carnival’s shares becoming more broadly investable over the coming years.
Overall, analysts have a Moderate Buy consensus rating on CCL stock based on nine Buys, four Holds, and two Sells assigned in the past three months, as indicated by the graphic above. Nevertheless, the average price target of $15.89 per share implies 13.64% downside potential.
