Carnival Cruise gets two Wall Street upgrades amid pent-up demand, potential summer restart

Published Fri, Apr 9 20218:11 AM EDTUpdated Fri, Apr 9 20214:04 PM EDT

Carnival Cruise shares have jumped more than 30% this year as the Covid-19 vaccine rollout spurs hope that cruise ships will soon be able to return to the seas, and Wall Street analysts are turning bullish on the stock. Credit Suisse and Argus both upgraded the company to buy-equivalent ratings on Friday, pointing to a coming return to sail coupled with pent-up demand following the pandemic. "We think the conversation is changing away from 'survival' and more towards potential earnings catalysts," Credit Suisse analysts led by Benjamin Chaiken wrote in a note to clients. The firm envisions volumes and prices rising above pre-Covid levels in 2022. The upgrades come after Carnival said Wednesday that first quarter bookings this year hit a record level, and were 90% above the prior quarter's levels. "We think the improvement in bookings reflects strong pent-up demand for cruise vacations as coronavirus vaccines are rolled out and the impact of the pandemic diminishes," noted Argus' John Staszak. He now sees the company reporting a full-year 2021 loss of $3.45 per share, down from a prior forecast of a $3.50 per share loss. The firm also established a $33 target on the stock, which is 16% above where shares closed on Thursday. Carnival's management also struck an optimistic tone earlier this week. "Everybody wants to go away. And I will tell you, the next best thing to actually going away is planning a vacation. And that's what a lot of people seem to be doing right now," David Bernstein, Carnival's chief financial officer, said in a conference call. As ships stay docked at port, Florida on Thursday announced that it is suing the CDC to allow cruises to resume sailings in the U.S. Florida Gov. Ron DeSantis said the delays are "irrational." Credit Suisse believes ships will be on the seas by mid to late summer. The firm's bull case on Carnival centers on four key drivers, including the company offloading 19 ships which will cut costs. The firm also believes that there's an opportunity for Carnival to rethink its shore-side costs including more efficient marketing, which could lead to further cost reductions. The company also has the opportunity to refinance its debt. Chaiken more than doubled his price target on the stock from $18 to $40. The new target is 40% above where shares closed on Thursday. Despite the stock's strong recovery this year, shares are still 60% below the stock's all-time high from Jan. 2018. Shares of Carnival gained 2.6% on Friday. - CNBC's Michael Bloom contributed reporting.

A Carnival cruise ship is docked, amid the coronavirus disease (COVID-19) pandemic, in Long Beach, California, U.S., April 7, 2021.

Lucy Nicholson | Reuters

Credit Suisse and Argus both upgraded the company to buy-equivalent ratings on Friday, pointing to a coming return to sail coupled with pent-up demand following the pandemic.