What happened
Shares of cruise tour company Carnival Corporation (CCL 2.73%) (CUK 2.46%) fell 2.3% through 3:25 p.m. ET Wednesday after analysts at investment bank Wells Fargo downgraded the stock to underweight.
And yet there's good news for Carnival stockholders today, too.
Image source: Getty Images.
So what
But first, the bad news. In a note released yesterday after close of trading, Wells Fargo reduced its rating on Carnival stock to underweight -- despite positing a price target of $21 on the stock (which only costs $19.50 right now, implying there's nearly 8% upside despite the downgrade).
In its note, Wells admitted that Carnival is likely to enjoy "gradually improving fundamentals in the coming quarters," reported TheFly.com today. Nevertheless, with Carnival stock up more than 25% already over the past three weeks, Wells says it's feeling "relatively more cautious" about prospects for further gains. The analyst expressed specific reservations about the risk of doing business in "periods of geopolitical tensions," and also highlighted the rising cost of fuel oil as threats to Carnival's profits.
Now what
As I said, that's the bad news. Now here's the good:
As The Wall Street Journal just reported, the U.S. Centers for Disease Control and Prevention today dropped its blanket warning to travelers to "avoid cruise travel, regardless of vaccination status," which it put in place late last year. "While the agency will continue to provide guidance to the cruise industry, the move leaves passengers to make their own risk assessments," reported the Journal. And further encouraging passengers (and investors), the CDC has lowered its numerical risk rating on the perils of cruising from four (the highest degree of risk) all the way down to two -- "moderate risk."
If you ask me, these developments -- both favorable to cruise stocks -- should outweigh the fact that one single analyst got marginally more pessimistic about Carnival stock yesterday. The fact that investors are still selling despite the good news might actually be a buying opportunity.
