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Why Did Carnival Shares Jump 12% Despite Huge Q1 Miss?

Story Highlights

Carnival Corporation reported weaker-than-expected Q1 results, massively missing both earnings and revenue estimates. What sparked investors’ interest was the doubling of booking volumes that show that the travel industry is back with a vengeance!

Carnival Corporation (CCL) (GB:0EV1) shares jumped 12.4% on June 24 despite the Miami-based cruise operator posting a worse-than-feared Q1 loss as well as missing top-line expectations.

Carnival Corporation is the world’s largest leisure travel company. The company’s portfolio includes a combined fleet of almost 100 ships across 10 cruise line brands.

Q1 Miss

The company reported an adjusted loss of $1.61 per share, which fell a massive 54 cents short of the street’s estimated loss of $1.07.

Meanwhile, revenues of $2.4 billion more than quadrupled year-over-year but fell far short of the $2.76 billion consensus.

On a positive note, however, occupancy grew to 69%, versus 54% in the prior quarter, while customer deposits increased $1.4 billion to $5.1 billion as of May 31, 2022, compared to 3.7 billion as of February 28, 2022.

CEO’s Comments

Carnival Corporation’s incoming President and CEO, Josh Weinstein, commented, “I am honored to lead this company as we push forward with a relentless long-term focus on driving revenue and returns to improve our balance sheet, while ensuring each brand provides an authentic cruise experience that resonates with their unique guest base, delivering value for our shareholders and our other many stakeholders.”

Wall Street’s Take

Following the Q1 miss, Stifel analyst Steven Wieczynski decreased the price target on Carnival Corporation by 50% to $20 from $30.

Furthermore, based on an impending recessionary environment, Wieczynski also slashed his 2022–24 earnings before interest, taxes, depreciation, and amortization (EBITDA) estimates.

The analyst stated, “While most of our estimates reductions are tied to higher fuel prices, we also decided to reduce our out year onboard spend and pricing assumptions to account for a tougher macro-environment, if in fact that plays out.”

He further added, “Even after cutting our EBITDA estimates by 17%, on average, we still see value with CCL shares for the longer-term investor who can stomach some near-term volatility until we get more clarity around the macro backdrop.”

Turning to Wall Street, CCL stock maintains a Hold consensus rating. Of 11 total analyst ratings, two Buys, five Holds, and four Sell were assigned over the past three months. The average Carnival price target is $16.61, implying 57.74% upside potential.

Increased Insider Trading

According to TipRanks’ Insider Trading Activity tool, the Insider Signal is currently Positive on CCL, with corporate insiders buying $2.4 million in shares in the last quarter.

Conclusion

Shares of Carnival have lost more than half of its market capitalization over the past year.

However, during the quarter, the company recorded record high booking volumes since the beginning of the pandemic that almost doubled sequentially. This could mean that the stock is ready for a turnaround, boosting investors’ confidence and leading to a share price gain on Friday.

Disclosure

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