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Carnival Plans To Raise $1B Via Share Sale; Stock Falls 4%

Carnival Corp. on Feb. 22 announced plans for a public share offering to raise a total of $1 billion. Shares dropped 4.3% in pre-market trading on Tuesday after closing at $25.97 the day before.

The leisure travel company will offer 40 million common shares at a price of $25.10 for each share. The offering is expected to close on Feb. 24. Carnival (CCL) said it expects to use the net proceeds from the share sale for general corporate purposes.

Back in January, Carnival’s CFO David Bernstein commented, “We ended the year with $9.5 billion in cash and have the liquidity in place to sustain ourselves throughout 2021, even in a zero-revenue environment.”

“While we raised capital mainly through debt this year, in the last few months we opportunistically strengthened our capital structure by raising $2.5 billion through at-the-market equity offering programs and by the early conversion of $1.5 billion of convertible debt. As we return to full operations, our cash flow will be the primary driver to return to investment grade credit over time, creating greater shareholder value,” Bernstein added.

Earlier this month, CCL raised another $3.5 billion in debt. (See Carnival Corp stock analysis on TipRanks)

Berenberg Bank analyst Stuart Gordon this month downgraded the stock from a Hold to a Sell but raised the price target from $10 to $14. Gordon is cautious on the leisure travel sector due to the COVID-19 pandemic and has “no idea” when cruise ships will set sail again.

The analyst does not expect net yields to return to 2019 levels until 2024 or 2025. Gordon also pointed out that while CCL’s debt has ballooned in 2020, there is still an uncertainty about the resumption of services, resulting in its enterprise value remaining “essentially unchanged” over the past 12 months, which he thinks is “unsustainable.”

The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating. That’s based on 3 Buys, 6 Holds, and 4 Sells. The average analyst price target of $19.69 implies 24% downside potential to current levels.

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Shrilekha Pethe
Shrilekha Pethe has been extensively covering and writing about the U.S. stock market since 2015, and has been writing stock news and analysis at TipRanks since 2021. Her core competency lies in analyzing the mining, banking, oil and gas, and technology sectors and all major stocks in those financial sectors. Shrilekha has also worked as an equity research analyst for a bulge-bracket client in investment banking, Credit Suisse, performing financial analysis of companies in the area of technology, media, and telecommunications. A postgraduate in finance from ICFAI Business School, Pune, the analyst-turned-writer is currently on her way to becoming a Certified Financial Planner. Shrilekha has also written for Kiplinger, a subsidiary of Future plc., which publishes research related to stocks, business forecasts and personal finance.