So, you're thinking about buying a cruise stock. The waters have been choppy, the headlines mixed. But according to one top analyst at Bank of America, Carnival Corporation & plc (CCL) might just be the ship you want to board for a long voyage higher.
Analyst Andrew G. Didora is sticking with a Buy rating and a $45 price target. That's a big number. It implies the stock, which was trading around $24 recently, could sail about 86% higher. That's not a gentle breeze; that's a potential explosion. The question is, what's fueling this optimism in the face of well-known headwinds like fuel costs and geopolitical tension?
It starts with a solid quarter. Carnival beat expectations on earnings per share and a key metric called net yield, which is basically how much money it makes from each passenger. This continues a trend of earnings momentum. But the real story isn't just about last quarter's numbers; it's about what management says is coming next.
In a clear signal of confidence, Carnival announced two major moves. First, a $2.5 billion share repurchase program. Buying back stock is a classic way to return cash to shareholders and can boost per-share earnings. Second, and perhaps more intriguing, is the launch of a new strategic push dubbed "Propel." The goal? To deliver over 50% growth in earnings per share and achieve a return on invested capital (ROIC) of more than 16% by 2029. That's a specific, ambitious target meant to show Wall Street that the post-pandemic recovery is morphing into a sustained profitability machine.
Didora's $45 target isn't plucked from thin air. He bases it on applying a valuation multiple of 10 times enterprise value to estimated 2027 earnings before interest, taxes, depreciation, and amortization (EBITDA). He argues this is justified by improving operations, a fleet that's getting newer and more efficient, and the company's ongoing efforts to pay down debt. The kicker? Right now, the stock trades at below 7 times those same 2027 EBITDA estimates. That's near the lowest levels it's seen historically, suggesting a lot of bad news might already be baked into the price.
Of course, no cruise is completely smooth sailing. The big speed bump right now is fuel. Carnival doesn't hedge its fuel exposure, meaning its profits are directly vulnerable to swings in oil prices. Didora is actually a bit more cautious than company guidance for the current quarter, projecting 28 cents per share in earnings versus Carnival's forecast of 34 cents, largely because he's assuming higher fuel costs.
But on the demand side, the picture looks steadier. The analyst notes there's been "no meaningful increase in cancellations." While booking momentum has softened a touch—likely due to headlines about global tensions and inflation—the company already has 85% of its 2026 capacity booked. That's a huge chunk of revenue already locked in, providing strong visibility and a buffer against near-term economic wobbles.
Looking further out, the capital return story gets even more compelling. Carnival has laid out a plan to distribute a whopping $14 billion to shareholders through 2029. To put that in perspective, that sum is equivalent to over 40% of the company's entire market value as it stands today. That's a massive potential return of cash, whether through buybacks or future dividends.
The bottom line from Didora's view: current stock weakness is an opportunity. He sees an attractive valuation, a balance sheet that's slowly getting healthier, and steady industry demand, all supporting the long-term upside. The risks—macroeconomic swings and those pesky, unpredictable fuel costs—are real and noted. But the thesis is that Carnival's strategic progress and financial targets are strong enough to navigate through them and deliver for investors willing to look past the short-term waves.
