Market News

Hedgeye Gives Carnival Cruise Lines a Lift

The cruise industry, and Carnival Cruise Lines (NYSE:CCL) in particular, has been badly battered by the COVID-19 pandemic and government responses to it. There were some signs of life coming out of the industry, and even these faced some headwinds of their own. Now, however, there’s another spark emerging from the ashes, thanks to a new opinion from Hedgeye. It was more than enough to send Carnival shares shooting upward in Friday afternoon trading.

Hedgeye’s Todd Jordan, along with Sean Jenkins, noted that Carnival may have the juice necessary to beat yield expectations from the sell side of the market. Not just Carnival, either, but also Norwegian Cruise Lines (NYSE:NCLH) and Royal Caribbean (NYSE:RCL). While Hedgeye’s perspective does sound a note of alarm for Carnival—that sentiment is currently more negative toward it than any other—pricing seems to be improving, and that should help it.

However, there are plenty of causes for concern. Recent reports noted that Carnival is likely to raise its onboard prices for both gratuities and Wi-Fi access. Worse, Carnival has a tarnished reputation for safety, and it’s getting worse. Almost 70% of all reported sexual assaults on cruise ships since 2010 were either on a Carnival or a Royal Caribbean vessel. There’s one bright spot, however; Carnival is poised to launch one of the largest new cruise vessels this year. The Carnival Jubilee holds 5,400 guests and cost nearly $1 billion to build.

Carnival’s debt load may also pose a problem. Wall Street is pulling back somewhat, as consensus calls Carnival stock a Hold in a split decision. Additionally, Carnival stock’s average price target of $11.78 per share gives it a modest 5.08% upside potential.


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