Carnival Stock Climbs Higher on Goldman Upgrade

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Carnival stock (CCL) is rising on Wednesday, following an upgrade from Goldman Sachs that argues fundamentals can drive more gains for the shares.

The back story. Carnival is up 15% year to date, putting it ahead of the market but behind peers Royal Caribbean Cruises (RCL) and Norwegian Cruise Line Holdings (NCLH), which have risen more than 20% and 30%, respectively, since the start of 2019.

Carnival was hit in December following its fourth-quarter earnings, and the cruise lines fell lower at the end of the year. The stocks have rebounded since, thanks to analyst confidence, robust demand, and strong earnings reports. Carnival’s CEO bought the dip and has logged a profit of more than 20% per share.

What’s new. Goldman’s Stephen Grambling upgraded Carnival to Buy from Neutral on Wednesday and raised his price target by $2, to $65. He cites three bullish factors: Rising capacity should support strong fundamentals (vacationers spend more money on newer ships); worries about Europe are overblown, given little impact on the company’s earnings; and the company has set expectations low with its guidance, a situation that could lead to beats and raises throughout the year.

Looking ahead. “Carnival’s lower bar on guidance, cheaper valuation vs. history, lower financial leverage, and historically less economically sensitive business model vs. peers have created a more favorable risk-reward where the potential downside in a recession scenario is outweighed by potential upside in sustained macro momentum,” Grambling writes.

He’s hardly the only analyst that’s bullish on the stock, with the average price target on the Street at above $66, reflecting more than 17% upside. Weakness in Europe and China worried some investors late last year, but cruise lines say that they haven’t seen much of a pinch from those trends, while North American demand remains strong, as consumer confidence is high and millennials emphasize experiences over possessions.

Hedged fuel costs and increased efficiency means that oil’s recent rise shouldn’t lead to much of a squeeze, and 2019’s “wave season” (roughly the first quarter of the year, when many cruises are booked) so far bodes well for full-year trends.

Carnival is up 2.5% to $56.56 in recent trading.

Write to Teresa Rivas at