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Mizuho bullish on Carnival stock with new $21 price target



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On Tuesday, Mizuho Securities initiated coverage on shares of Carnival Corporation (NYSE:CCL), the well-known cruise operator, with a Buy rating and a price target set at $21.00. The firm’s positive stance hinges on two primary factors that could potentially elevate the company’s financial performance above current market expectations.

The first driver behind Mizuho’s Buy rating is the anticipated upside from Carnival’s ongoing asset sale transformation. The firm believes that this strategy will not only improve the company’s margins but also foster future earnings growth.

The second factor is Carnival’s valuation discount compared to its peer, Norwegian Cruise Line (NYSE:NCLH) Holdings Ltd. (NYSE:NCLH), which Mizuho rates as Neutral. Additionally, Carnival is expected to see an acceleration in free cash flow (FCF) as its capital expenditure requirements are projected to significantly decrease in 2025 and 2026, which is particularly favorable when compared to Norwegian Cruise Line Holdings.

Mizuho’s earnings before interest, taxes, depreciation, and amortization (EBITDA) forecasts for Carnival for the years 2024, 2025, and 2026 are $5.65 billion, $6.22 billion, and $6.8 billion, respectively. These projections are slightly more optimistic than the consensus estimates on Wall Street, which stand at $5.69 billion for 2024, $6.19 billion for 2025, and $6.54 billion for 2026.

The discrepancy between Mizuho’s estimates and those of other analysts is attributed to the expected benefits from Carnival’s asset sale portfolio transformation. Mizuho expresses increased confidence that Carnival has a path to achieving higher than expected EBITDA figures.

The firm’s analysis suggests that Carnival Corporation is on a trajectory to not only meet but potentially exceed current market expectations, thanks to strategic initiatives and a favorable comparison in terms of capital expenditures and valuation relative to its industry peers. The $21.00 price target reflects Mizuho’s anticipation of Carnival’s positive financial evolution in the coming years.

InvestingPro Insights

As Mizuho Securities shines a spotlight on Carnival Corporation’s potential, recent data from InvestingPro reinforces the narrative of a company on the cusp of significant financial improvements. The market capitalization of Carnival stands at a solid $19.79 billion, indicating the substantial size and influence of the company within the leisure industry. Despite past challenges, revenue growth has been robust, with a remarkable increase of 77.44% over the last twelve months as of Q4 2023, demonstrating Carnival’s ability to bounce back and capture market demand.

InvestingPro Tips highlight Carnival’s high shareholder yield and the anticipation of net income growth this year, which could be a boon for investors looking for companies with a positive earnings outlook. Additionally, with six analysts having revised their earnings upwards for the upcoming period, there is a sense of optimism surrounding Carnival’s financial trajectory. For those interested in deeper analysis, there are over ten additional InvestingPro Tips available, providing a more comprehensive understanding of Carnival’s position in the market.

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