Shares of Carnival (CCL 2.52%) (CUK 1.91%) were up 2.2% as of 1:37 p.m. Wednesday. Investors seem to still be digesting the cruise ship operator's $500 million stock sale proposal, while an analyst maintained his buy rating on the stock.
Carnival's planned stock offering is somewhat different from what we've come to expect from companies in its segment of the travel and tourism industry over the past year and a half. While many cruise lines have issued stock to raise the cash they needed just to stay afloat, as my colleague Dan Caplinger points out, the company will only be selling this tranche of common stock of Carnival Corp. (CCL) when its U.K.-traded Carnival plc (CUK) shares are trading at a relative discount. It will then use some of the proceeds of the CCL sales to buy back CUK shares.
"As a result, Carnival Corporation and Carnival plc would derive an economic benefit from the offering and the use of proceeds therefrom," Caplinger writes.
Argus analyst John Staszak remains bullish on Carnival, and he reiterated his buy rating and $35 per share price target for it. That implies a 35% gain from where the cruise line operator's stock closed Tuesday.
With a Carnival sailing out of Galveston, Texas, scheduled for July 3 and advance bookings in its fiscal second quarter (which ended May 31) running 45% ahead of the prior quarter, Staszak is convinced that pent-up demand for cruise vacations remains strong, so he scaled up his earnings estimate for its fiscal 2022 by 122%, from $0.36 per share to $0.80 per share.