Carnival Corp Could Be Worth Significantly More

Mark Hake

Carnival Corp (CCL) stock has risen over 26% from its lows as of early March. But it still has at least another 24% higher it could rise to over $24 per share.

  • This is based on its historical price-to-sales (P/S) multiple of 2.0x in the past 5 years. Right now it trades well below this.
  • People are returning to cruising and Carnival Corp is going to continue to benefit from this, including turning free cash flow (FCF) positive.

People are back to cruising. Carnival cruises are now ramping up. As a result, CCL stock could rise over 24% from here. 

Carnival stock has started to move up from its trough price of $15.53 on March 7. But it's still down over 25% in the past six months. But now CCL stock is on the move up. 

Where Things Stand At Carnival Corp

Based on Carnival's March 22 update on its earnings for its fiscal Q1 ending Feb. 28, investors have reason to be very hopeful for the future. For example, Carnival expects the full capacity to be running by the summer when it makes most of its cash flow.

Moreover, Carnival now says that its monthly adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) will turn positive at the beginning of its summer season. EBITDA is a form of cash flow measurement.

In that regard, Carnival now says that it has plenty of liquidity - over $7.2 billion in the bank.

As it stands, analysts now expect that for the year ending Nov. 30, 2022, Carnival will produce $14.2 billion in revenue. That is over 2.5 times the $5.595 billion in sales the company made in 2020.

Nevertheless, CCL stock now has a market capitalization of $23.0 billion as of March 30. This means it’s trading for 1.62 times forward sales.

Valuing CCL Stock

For example, Morningstar reports that Carnival stock has traded with an average multiple over the last 5 years at 2 times sales.

That implies CCL stock is too cheap. The stock could rise 23.5% from 1.62 times sales to 2 times. 

Analysts tend to agree. TipRanks’ survey has an average price target of $21.88. That represents an upside of 11.6% for the CCL stock from today's price.

Carnival now says that it can achieve positive adjusted EBITDA starting with the beginning of the summer cruise season. That is a good reason to rely on our 24% higher price target of $24.19 per share.

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This is not financial advice and you should not rely on my analysis to buy or sell any stock. I am not undertaking to induce you to buy or sell any securities.

I am relying on the “publisher’s exclusion” in the Investment Advisers Act of 1940 to provide this information without any personalized or individualized investment advice.

Mark Hake writes articles on InvestorPlace.com, Barchart.com, Medium.com, and Newsbreak.com on stocks and cryptos.

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Mark Hake is a financial analyst, investor, and Chartered Financial Analyst (CFA). He writes about US and foreign stocks as well as cryptos, hedge funds, and private equity. He previously ran his own hedge fund, investment research firm, and acted as CFO for a fintech startup. He focuses on finding value, arbitrage, and hidden asset opportunities.

Phoenix, AZ
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