It's been 30 years since Carnival (CCL -0.34%) (CUK -0.22%) shares traded for $6 apiece, but at least one Wall Street pro feels that it's a feasible price target for the world's largest cruise line operator. Three analysts lowered their near-term price goals on Carnival stock to between $8 and $22 on Monday, following a disappointing financial update late last week. The limbo stick moved even lower when Jamie Rollo at Morgan Stanley stepped up on Tuesday.

Rollo is adjusting his price target from $7 to $6. His pulse on booking agents shows that customer demand for taking a cruise vacation has improved from where it was a few months ago, but his survey's outlook for the industry is still mixed. He's lowering his bottom-line forecasts by as much as 21% after Carnival's poorly received quarterly report on Friday. A dangerous combination of weak cruise pricing and costs climbing faster than expected is going to be problematic at both ends of the income statement. He naturally has a bearish underweight rating on the stock. 

Unoccupied deck chairs on a cruise ship.

Image source: Getty Images.

Rough seas 

Expectations were elevated heading into last week's quarterly update. Analysts were nudging their revenue forecasts higher leading up to Friday's earnings release, and some of the more upbeat Wall Street pros were even suggesting that Carnival would finally turn a profit after 10 consecutive quarters of deficits. 

It didn't pan out that way.

Carnival didn't crack $5 billion in quarterly revenue as analysts were projecting. Revenue for the seasonally potent fiscal Q3 of $4.31 billion would land 34% below where it was in the last pre-pandemic summertime quarter of 2019. The market was hoping for Carnival's quarterly loss to contract to $0.13 a share -- again, with some of the Carnival trackers donning rosier spectacles and expecting an outright profit -- but that also proved to be too ambitious. The cruise line bellwether would go on to deliver $0.65 a share of red ink. Stretching its streak of quarterly deficits wasn't the only problematic trend that Carnival extended.

  EPS (Estimate) EPS (Actual) Surprise
Q3 2021 ($1.25) ($1.55) (24%)
Q4 2021 ($1.27) ($1.52) (20%)
Q1 2022 ($1.00) ($1.57) (57%)
Q2 2022 ($1.14) ($1.63) (43%)
Q3 2022 ($0.13) ($0.065) (354%)

 Data source: Yahoo! Finance.

Carnival has consistently fallen short of Wall Street profit targets for more than a year. It's not the first time that the cruise line industry has missed out on the travel boom. With everyone from theme park operators to airlines seeing a boost this summer -- "revenge travel," they called it, as folks tried to make up for squandered vacations during the darkest days of the pandemic -- cruise lines failed to keep up. Carnival certainly fared better than it did last summer when most of its fleet was still not taking on passengers, but the recovery has been slow for the industry.

Carnival and its peers have been relaxing vaccination and testing requirements in recent weeks, but it could be more than that keeping folks away. Carnival noted on Friday that cumulative advance bookings for the fourth quarter are below historical levels, despite more encouraging trends looking out to 2023. With the global economy now jittery, the money that some seafarers were saving for future voyages is now going to pay off more pressing bills. Throw in the current climate of rising interest rates, and that could also be troublesome for Carnival, with its total debt topping $35 billion. The long-term view may be promising, but Carnival's weak report and thorny near-term outlook make it hard to get past the next port of call.