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Why Carnival Stock Beat the Market Today

By Eric Volkman – Updated Sep 22, 2021 at 5:02PM

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An analyst's positive note on the company's future adds to the bullishness coming back to its shares.

What happened

Both stocks of cruise ship company Carnival (CCL -2.62%) (CUK -2.19%) easily topped the performance of the S&P 500 index on Wednesday. The two each advanced by around 2.8% as the company neared its latest quarterly earnings release.

So what

Carnival will report its third-quarter results this Friday, and it seems investors and other interested parties are looking forward to a better-than-expected quarter.

One person who believes the company has a bright future is Credit Suisse analyst Benjamin Chaiken. On Wednesday he reiterated his unambiguous outperform (buy) recommendation on Carnival's U.S. stock, at a price target of $40. That's nearly double its current level.

A Carnival cruise ship sailing in the ocean during the sunset.

Image source: Carnival Corporation.

Chaiken believes the company won't take long to return to its pre-pandemic fundamental performance. He wrote in a new research note that "Pricing trends have remained surprisingly robust throughout the pandemic, and our pricing checks suggest that trend has continued, indicating pricing up mid-single-digits vs. 2019."

Consequently, he added, "We think that ALBDs will reach 2019 levels by [the second half of 2022], setting up 2023 to be a compelling growth year."

ALBDs are "available lower berth days," a standard capacity measure in the cruise industry. It's calculated by multiplying overall ship capacity by the operator's total number of revenue-producing days. 

Now what

Momentum certainly appears to be on Carnival's side, with the company steadily resuming sailings from various major ports. In fact, on Monday it announced that half of its U.S. fleet is now back in service, following the return of two ships, Dream and Glory.

While the pandemic is far from over, people are eager to get back on the road, in the air, or on the sea. This is why many investors are becoming increasingly more bullish on shares of big travel industry players like Carnival.

Eric Volkman 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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