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Why Carnival Stock Rose Today

By Rich Duprey – Aug 6, 2021 at 4:59PM

Key Points

  • Carnival should benefit from the strong undercurrent of recovery in the cruise industry.
  • An analyst says the beaten-down cruise operator's stock looks attractive.

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The cruise ship operator suddenly has favorable winds.

What happened

Shares of Carnival (CCL) (CUK 0.23%) closed out the week up 2.3% on Friday after an analyst raised his price target on the cruise operator because of improving fundamentals in the industry.

So what

Citigroup analyst James Ainley raised his price target on Carnival from $30 to $34, believing the pullback in the cruise stock gave investors a "great entry point."

Couples standing on deck of cruise ship

Image source: Getty Images.

Ainley pointed to the earnings report issued by Royal Caribbean (RCL 0.57%) on Wednesday, indicating he saw it as a strong commentary about the business. The market agreed, as it sent shares up 7% yesterday, though today the stock ended mostly flat.

Carnival's stock is down 26% from the recent highs it hit in early June over fears that the delta variant of COVID-19 would sink the travel and tourism industry's recovery, which was only just getting started.

Now what

Carnival's Princess Cruises brand recently completed its first Alaskan itinerary and yesterday announced its calendar to Alaska for the 2023 sailing season.

The company also bounced higher on Royal Caribbean's earnings and continued moving higher today, perhaps because it is the industry's largest. Just as it takes a long time to turn a big ship around, once it builds up a head of steam, it's not easy to stop. And it just might be best to climb aboard to avoid its wake.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool recommends Carnival. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Carnival Stock Quote
Carnival
CCL
$9.73 (%)
Royal Caribbean Stock Quote
Royal Caribbean
RCL
$59.68 (0.57%) $0.34
Carnival Corporation & Plc Stock Quote
Carnival Corporation & Plc
CUK
$8.78 (0.23%) $0.02

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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