To The Moon

Stocks surged Friday as investors breathed a huge sigh of relief after Federal Reserve Chair Jerome Powell indicated that interest rates could be cut.

$Dow Jones(.DJI)$ jumped 1.9%, or about 850 points, hitting a record closing high for the first time since last December. The benchmark $S&P 500(.SPX)$ rose 1.5%, snapping a five-day losing streak and closing fractionally below a record high of its own, while the tech-heavy $NASDAQ(.IXIC)$ added 1.9%.

The best-performing concepts is Cruise Concept. Considering the different perceptions of the stock, this time TigerPicks chose $Carnival(CCL)$ to have a fundamental highlight to help users understand it better.

$Carnival(CCL)$

Carnival Corporation is a global cruise and leisure travel company. The Company has a portfolio of cruise lines, including AIDA Cruises, Carnival Cruise Line, Costa Cruises, Cunard, Holland America Line, P&O Cruises (Australia), P&O Cruises (UK), Princess Cruises, and Seabourn. The Company's segment includes NAA cruise operations, Europe cruise operations (Europe), Cruise Support and Tour and Other.

Mixed Signals On Consumer Health

For now, the resilient consumer appetite for traveling remains visible in CCL's record high customer deposits at $8.53B in FQ2'25 (+17.6% QoQ/ +3.1% YoY), as similarly observed in its peer, Royal Caribbean Cruises Ltd. (RCL) at $6.37B (+0.6% QoQ/ +2.7% YoY), significantly aided by their consumers' willingness to pay the higher ticket prices/ onboard spending.

It has also contributed to CCL's raised FY2025 guidance, with net yields of +5% YoY, adj EBITDA of $6.9B (+13.1% YoY), and adj EPS of $1.97 (+38.7% YoY) compared to the previous guidance at +4.2% YoY, $6.6B (+8.1% YoY), and $1.70 (+19.7% YoY), respectively, significantly aided by the increased capacity from the newbuilds and the higher close-in booking trends.

Part of the headwinds may be attributed to the mixed signals on the consumer spending health, as the US inflation notably rises in June 2025, the US labor market weakens in July 2025, and the Fed turns hawkish in the latest FOMC meeting.

While the consumers' spending intentions for leisure travel remains high (nearing four-year heights), we can understand why the market has turned cautious after CCL's extreme rally by +86.3% between the April 2025 bottom and the July 2025 peak.

The Consensus Forward Estimates

These reasons may also be why the consensus have further raised their forward estimates, with CCL expected to report an accelerated top/ bottom-line growth at a CAGR of +4.5%/ +22.6% through FY2027.

This is compared to the prior estimates of +3.3%/ +12.4% (a year ago), the 5Y historical growth at +3.7%/ -20.2%, and the 5Y pre-pandemic growth at +5.6%/ +17.6%, respectively, with it underscoring its promising reversal from the prior pandemic pains.

CCL Valuations

CCL 5Y Stock Price

Based on the stock price chart above, it is apparent that CCL's historical trading pattern has turned out as expected, as it fails to break out of the 2021 resistance levels of $30s ranges while seemingly on its way to retest the next uptrend support lines of $25s.

The pullback has been a boon in our opinion, since it brings the stock closer to our fair value estimates of $27.90, based on the management's raised FY2025 adj EPS guidance at approximately $1.97 (+38.7%) and the current FWD P/E non-GAAP valuations of 14.19x (not too far from the 5Y pre-pandemic P/E means of 14.50x).

It has also triggered an expanded upside potential of +29.6% to our long-term price target of $37.10, based on the consensus raised FY2027 adj EPS estimates to $2.62, despite the immense recovery from the April 2025 bottom.

CCL's Reversing Momentum

CCL's Reversing Momentum

Despite the still excellent upside potential, we believe that some patience may be more prudent in the mean time, since CCL's technical indicators are implying an ongoing reversal in momentum with further pullback likely, as traders seemingly take gains off the table.

At the same time, readers must note that the upcoming August/ September months typically trigger weaker stock price movements, with it likely to further digest part of the stock's recent gains.

Combined with the mixed macroeconomic/ consumer spending trends, our reiterated Buy rating for CCL comes with the caveat that investors observe the stock price movement for a little longer, preferably upon a bounce at the upcoming $25s retest, with those levels also nearer to the 200 days moving averages.

Barring which, we may see the stock further correct to the uptrend support floor of $20s, as previously observed in May 2023/ November 2023/ August 2024/ April 2025, with it remaining to be seen how Q3'25 may develop.

As a result of the potential downside at between -12.6% and -30% from the current levels, we urge a moderate patience in the mean time.

Stock Price Forecast:

Here are the target price forecasts for the next 12 months from analysts.

Based on 16 Wall Street analysts offering 12 month price targets for Carnival in the last 3 months. The average price target is $32.36 with a high forecast of $38.00 and a low forecast of $22.00. The average price target represents a 10.56% change from the last price of $29.27.

Resource:

https://seekingalpha.com/article/4813121-carnival-let-the-meltdown-play-out-buy-the-upcoming-dip

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