As Carnival Stock Tumbles, Wall Street Says Buy Now

Core Viewpoint - Carnival has made a significant recovery post-pandemic, showing strong demand and record operating profits, but recent stock price declines raise questions about future performance [1][2]. Company Overview - Carnival is the largest cruise operator globally, with a fleet of 90 ships across various brands, including Princess and Holland [2]. - The company is experiencing demand that exceeds its current capacity, prompting orders for additional ships to accommodate travelers [2]. Demand Generation - Carnival is actively enhancing demand through new features and exclusive destinations, such as the recently opened Celebration Key in the Caribbean [3]. - Management anticipates high visitor traffic at Celebration Key, with two ships in port 85% of the time [3]. Capacity Expansion - The company is strategically relocating ships to high-demand areas and has plans to increase capacity for the 2027 and 2028 sailing seasons [4]. - New booking options have been introduced in South Florida and Texas, along with new home ports in Norfolk, Virginia, and Baltimore, Maryland [4]. Financial Performance - Carnival reported its highest-ever quarterly adjusted net income of $2 billion for the fiscal third quarter ending August 31, exceeding guidance across all metrics [6]. - The company has raised its full-year guidance multiple times this year, indicating strong financial momentum [6]. Stock Market Reaction - Despite strong earnings, Carnival's stock fell 7% following the report, attributed to concerns over its remaining $26.5 billion debt and a modest 4% year-over-year revenue increase [7][8]. - The market reaction may also be linked to rising crude oil prices and plans to convert some debt into stock, which could dilute existing shares [8]. Analyst Sentiment - Wall Street analysts are optimistic, with 73% recommending Carnival as a buy, projecting an average price target increase of 27% over the next 12 to 18 months [9]. - Analysts suggest that long-term investors may find this a favorable buying opportunity despite potential short-term volatility [10][11].