×

Hurricane-driven sell-off in Carnival is overdone, time to 'back up the truck,' analyst says

  • Nomura Instinet reiterates its buy rating for Carnival shares, saying cruise reservations will likely improve.
  • Carnival "has pulled back to nearly a 'back up the truck' level," the firm's analyst Harry Curtis writes in a note to clients. "We view this period of uncertainty as an opportunity to buy the sector, including industry leader Carnival."

Carnival shares are faltering this month after the damage caused by multiple hurricanes in the Caribbean hurt cruise line demand. But the drop is now a great buying opportunity, according to one Wall Street firm.

Nomura Instinet reiterated its buy rating for Carnival shares, saying cruise reservations will likely improve in the coming year.

Carnival "has pulled back to nearly a 'back up the truck' level. We appreciate the uncertainty surrounding Caribbean pricing from Dec. – Mar. and have assumed that the region may under-earn through 1Q18," analyst Harry Curtis wrote in a note to clients Friday. "We view this period of uncertainty as an opportunity to buy the sector, including industry leader Carnival."

The company's shares have declined 7.4 percent this month through Thursday compared with the S&P 500's 1.6 percent gain. But the stock is still up 24 percent year to date versus the market's 12.1 percent return.

Curtis reaffirmed his $75 price target for Carnival, representing 16.5 percent upside to Thursday's close.

He noted that the company said fourth-quarter cancellations have been "manageable" and predicted that Carnival will still be able to generate "high teens" annual earnings growth in 2018 and 2019.

"Caribbean bookings have likely bottomed and are slowly improving as itineraries are redefined," Curtis wrote. "From a trading perspective, we believe the catalyst behind consistently better stock performance needs to be reacceleration of 1Q booking volumes in the Caribbean."