Why Is Wall Street Falling in Love With Carnival Stock Again?

Carnival Corporation (NYSE: CCL) (NYSE: CUK) has been the talk of the town on Wall Street lately, with analysts boosting their price targets and bullish sentiment abound. The world's largest cruise line operator has seen a remarkable turnaround since the pandemic, and investors are taking notice. But what's driving this renewed love affair with Carnival stock? Let's dive in.



First and foremost, Carnival has been crushing earnings expectations. In the past two years, the company has reported eight consecutive quarters of earnings per share (EPS) beats, with the most recent quarter showing a 62% increase in adjusted EPS off a 15% year-over-year increase in revenue. This strong performance has analysts scrambling to raise their targets ahead of the company's fiscal fourth-quarter results, scheduled for December 18, 2024.



Changes in interest rates and debt levels have also played a significant role in Carnival's stock price performance. As interest rates have declined, Carnival's borrowing costs have reduced, improving its profitability. With interest rates currently at 4.25% to 4.5%, Carnival's net interest income has improved, contributing to its record earnings. Additionally, Carnival's debt levels have decreased, from $34.8 billion in 2023 to $34.7 billion in 2024, further enhancing its financial stability. Lower interest rates and reduced debt have enabled Carnival to pay down its debt faster, boosting investor confidence and driving its stock price up.

Analysts' price target revisions have historically correlated positively with Carnival's actual stock performance. Over the past two years, Carnival has consistently beaten analyst EPS estimates, with an average surprise of 17.5%. This trend has led to upward revisions in price targets, with the average target increasing by 25% over the same period. As of December 17, 2024, the average price target for Carnival stock is $32.50, representing a 26% upside from the current price. This positive correlation suggests that analysts' bullish sentiment on Carnival stock is well-founded and reflects the company's strong fundamentals and growth prospects.



Analysts' confidence in Carnival's future performance is driven by several factors. Firstly, the cruise industry's recovery from the pandemic has been robust, with demand for cruises reaching record highs. This is reflected in Carnival's strong revenue growth, which has outpaced analysts' expectations for the past two years. Additionally, Carnival's earnings per share have soared, with a 62% increase in the latest quarter, indicating the company's ability to generate profits despite headwinds. Furthermore, analysts are impressed by Carnival's ability to consistently beat earnings estimates, with eight consecutive quarters of marginal to double-digit surprises. Lastly, the economic climate is favorable for cruise line stocks, with pent-up demand and strong consumer spending driving industry growth.

In conclusion, Carnival Corporation's stock price surge can be attributed to a combination of factors, including strong earnings performance, favorable interest rates and debt levels, and analysts' bullish sentiment. As the cruise industry continues to recover and Carnival maintains its impressive track record, investors can expect the love affair with Carnival stock to continue.