Carnival Corporation & plc (NYSE: CCL) stock rose 3% in the pre-market trading Wednesday following a bullish outlook from Mizuho analyst.
Ben Chaiken, an analyst at Mizuho, has initiated coverage on Carnival Corporation (CCL) stock with a Buy rating and set a price target of $21.
The analyst noted that Carnival sold nearly 20% of its fleet during the COVID shutdown, with a significant portion including many vessels with lower margins.
The remaining fleet, the analyst estimates, generated five times the EBITDA/Available Lower Berth Day (ALBD) compared to the sold assets, laying the foundation for robust earnings growth once Carnival fully resumes operations.
Following the transactions in FY23, CCL put forth a long-term earnings forecast. The analyst considers the projection of $6.8 billion in EBITDA by 2026 to be not only achievable but also potentially surpassable.
The free cash flow profile of CCL is undergoing a significant transformation, particularly in ’25 and ’26, as the EBITDA rises and the Capex requirements fall, as per the analyst.
The analyst highlights that Carnival has the potential to generate $6 billion in FCF over the next three years, which equates to 25% of its market cap. He also predicts a surge in estimates as the company’s asset sale transformation boosts margins and propels future earnings growth beyond expectations.
Moreover, Chaiken points out Carnival’s favorable valuation compared to its industry peer, Norwegian Cruise Line Holdings (NYSE: NCLH), and the accelerating free cash flow primarily driven by reduced capital expenditure requirements in 2025 and 2026.
Carnival recently announced the development of a pier at Half Moon Cay and the construction of Celebration Key. Mizuho analyst views these initiatives favorably and expects them to contribute to future yield growth.
Carnival Corporation (NYSE: CCL) Stock Price Action
CCL stock rose 2.70% in the pre-market trading on Wednesday after closing the regular trade at $17.03 on Tuesday. The traders had exchanged hands with 65,027,244 (65.02 million) shares compared to the average daily trading volume of 30.03 million.
