Strong demand in travel has sent Carnival (CCL -0.30%) shares up 60% over the last year, but the stock's recent pullback could be a great buying opportunity, according to analysts at Stifel Financial.
Following another strong earnings report last week, Stifel maintained a buy rating on the stock. The firm knocked $1 off its previous price target, but at $25, the analysts still see 54% upside over the next 12 months or so from the current share price of $16.21.
Why analysts like the stock
The cruise industry is seeing strong demand over the last few years, and it's reflected in Carnival's business performance. On many metrics, Carnival has made a full recovery from the pandemic-related disruptions a few years ago. It reported record quarterly revenue of $5.4 billion last quarter, bringing its trailing-12-month revenue to a new high of $22.57 billion.
While the company is still in the process of improving its profitability back to pre-pandemic levels, its better-than-expected adjusted net loss in the quarter shows a positive direction for the business.
Stifel's analyst believes that if consumer demand holds up, Carnival should beat its profit guidance for fiscal 2024, and that could fuel the stock higher.
Is Carnival stock a buy?
The stock appears fairly valued at around $16, as it is trading around its pre-pandemic valuation on an enterprise value-to-revenue basis. This means Carnival will have to show further improvement on the bottom line to deliver meaningful gains for investors.
Carnival's operating profit was $2.4 billion over the last four quarters, almost back to the $3.2 billion it reported before the pandemic.
It may not hit the analyst's price target until the company begins to report record profits beyond pre-pandemic levels. On that note, strong demand is lifting average ticket prices, which could serve as the trigger that strengthens Carnival's profits this year and sends the share price higher.
