June 26 (Reuters) - Cruise operator Carnival (CCL. N) on Monday forecast third-quarter profit largely below estimates as rising marketing and labor costs eat into gains from higher ticket prices and strong demand.
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Why Carnival's stock might fall. The bearish case on Carnival is that an increase in price could derail the company's growth. Plus the company's debt levels remain high, and Carnival has already incurred $1.6 billion in interest expenses over the past nine months (up from $1.2 billion a year ago).
Stock Price ForecastThe 18 analysts offering 12-month price forecasts for Carnival Corp have a median target of 19.00, with a high estimate of 25.00 and a low estimate of 10.18. The median estimate represents a +49.14% increase from the last price of 12.74.
Market pros have also been inching their price targets higher for Royal Caribbean and Norwegian. It's not a surprise. The revenge travel surge that helped lift most travel and tourism stocks in 2021 and 2022 is finally coming around to raise the water for cruise line stocks in 2023.
However, investors should note that Carnival's debt levels more than tripled throughout the COVID-19 crisis. It ended the first quarter of fiscal 2023 with $32.7 billion in long-term debt, compared to $9.7 billion at the end of fiscal 2019, which gives it a staggering debt-to-equity ratio of 5.6.
Cruise giant Carnival was hit hard during the worst of the pandemic. Now, a top Wall Street analyst has issued a dire potential outlook for the company in the case of recession. Morgan Stanley's Jamie Rollo outlined a worse-case scenario: Carnival stock could fall to $0 in the event of a global economic downturn.
Carnival and Disney paused dividend payments due to complications from the pandemic. Fool.com contributor Parkev Tatevosian evaluates Carnival (CCL -5.19%) and Disney (DIS -0.89%) to determine which company is in a better financial position to pay a dividend.
What are the benefits of holding Carnival cruise shares? Anyone that owns 100 shares or more of the Carnival Corporation can enjoy an amount of onboard credit on their next cruise, up to $250 on sailings on cruise lines operating out of the US.
CLIA forecasts passenger numbers will not only meet but exceed pre-pandemic levels by the end of 2023. And according to Cruise Industry News' cruise ship orderbook for ocean-going vessels, nearly 40 new ships are lined up to debut this year alone, with more than 75 vessels on order through 2027.