Analyst Raises Price Targets on Cruise Stocks. Thing Is, They Already Trade Above the Targets.
Carnival has said it could survive 2021 even if it can’t resume sailings. Here, the Carnival Sunrise ship is seen moored in Miami.
Daniel Slim/FP via Getty Images
A Deutsche Bank analyst this week raised his price targets on all three of the major U.S. cruise operators. But don’t be deceived.
The analyst, Chis Woronka, is hardly pounding the table. He has a Hold rating on the stocks and doesn’t see cruising getting back to normal soon. And his price targets for Carnival (ticker: CCL), Royal Caribbean Group (RCL), and Norwegian Cruise Line Holdings (NCLH) are below where the stocks trade now.
After making big gains of more than 35% in November following positive Covid vaccine news and developments, the cruise stocks have cooled off over the past month. In a research note Friday, Woronka attributed that turnaround “to multiple reasons, with perhaps the most important being a bit less optimism of late about the timing of a return to sailings out of U.S. ports.”
“It’s unlikely, in our view, that entire fleets will be back in the water much before year end,” he wrote. “The critical question is, at what point can enough capacity return such that current (elevated) cash burn levels can be reduced to more manageable levels that might not necessitate further capital raises?”
Carnival, for example, said recently that it had raised about $19 billion of new capital since it suspended passenger cruises last March. These companies have mostly been shut down since then due to the pandemic, causing them to burn through hundreds of millions of cash every month with most of their vessels laid up.
In midmorning trading Friday, shares of Carnival were up 0.4% to around $21, and Royal Caribbean was down about 2% to $74.37. Norwegian was at $26, off 1.5%.
Following Carnival’s fiscal fourth quarter earnings release Monday, Woronka raised his price target to $16 from $13. Carnival, the largest cruise operator in terms of revenue, reported a quarterly loss of $2.2 billion, or $1.9 billion on an adjusted basis. But Carnival executives said the company has enough cash to sustain things through 2021, even without any revenue.
Woronka also boosted his price target on Royal Caribbean to $62 from $46. His price target for Norwegian Cruise Line Holdings went to $22 from $18. All of those price targets factor in 2023 earnings. The higher price targets for all three resulted from higher 2023 forecasts Woronka is modeling for all three companies.
Royal Caribbean was trading Friday morning about 20% above Woronka’s revised price target, as was Norwegian. Carnival’s stock was more than 30% above Woronka’s revised price target.
Write to Lawrence C. Strauss at [email protected]
