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Carnival Pullback Could Be a Long-Term Buying Opportunity, Says 5-Star Analyst

The coronavirus has had a devastating effect on a plethora of industries, with cruise operators amongst the most badly hit.

The recent spike in coronavirus cases has sown further uncertainty. Timelines for the resumption of sailings have been pushed back further into the unknown, raising even more concern regarding the industry’s future.

Yet, this is precisely why Tigress Financial analyst Ivan Feinseth believes the time is right to consider an investment in the world’s largest cruise operator Carnival (CCL).

The 5-star analyst reiterated a Buy rating on CCL “as it will overcome COVID-19 pandemic headwinds, and the pullback in the stock creates a long-term buying opportunity.” However, Feinseth has no fixed price target in mind. (To watch Feinseth’s track record, click here)

Once cruise lines are unleashed on the waves again, Feinseth predicts the industry will bounce back with a vengeance. Driving his long-term thesis for Carnival, in particular, are three main points.

For one, despite the uncertainty, future booking trends are holding up well. “CCL is experiencing pricing trends for 2021 within the historical ranges of 2019,” Feinseth noted. He also highlighted the fact that 55% of customers booked on cancelled cruises are rebooking or accepting a “future cruise credit over cash refunds.” Even those requesting their money back, Feinseth says, have indicated an intention to rebook once normality resumes.

Secondly, further supporting the analyst’s confidence is the cruise operator’s focus on stringent health protocols to ensure passengers’ safety. “When sailings resume, cruise ships will have a more controlled environment, offering increasing safety from potential pandemics as CCL implements fleetwide programs incorporating state-of-the-art safety protocols,” the analyst reassured.

Lastly, until it is able to resume operations, Carnival has taken the required steps to maintain the health of its balance sheet. Feinseth noted, “CCL has undergone extensive capital conservation initiatives, including significantly reducing operating expenses as well as reducing and, where possible eliminating discretionary capital expenditures.”

These “debt and equity offerings” should keep CCL well-funded until at least early 2021, which is when Feinseth expects sailing, at the latest, to resume.

So that’s Tigress Financial’s view, what about the rest of the Street’s take? Overall, Feinseth’s fellow analysts aren’t quite as bullish. 4 Buy ratings, 12 Holds and 4 Sells add up to a Hold consensus rating. The average price target clocks in at $16.91, and implies possible upside of 10%. (See Carnival stock-price forecast on TipRanks)

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Marty Shtrubel
Marty Shtrubel was born in the UK, raised in Israel, and then headed back to London, where he made music and pursued a career in sound recording. After a move back to Tel Aviv, he set off on a new path and now works as a financial blogger at TipRanks.

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