Carnival's (CCL) Stock Forecast Before Q1 Business Update

Carnival Corp. (CCL) will provide its business update on April 7. The company will also hold a conference call with investors. The stock has gained 24 percent YTD and has more than doubled over the last year. Carnival stock trades at half of what it did before the COVID-19 pandemic. What’s the forecast for CCL stock before its first-quarter business update?

Cruise line companies, including Carnival and Royal Caribbean, received a jolt in March. The CDC said that it doesn’t plan to lift its no-sail order. In October 2020, the CDC extended the no-sail order up to November 1, 2021. While the cruise line industry was lobbying to resume cruise activity by June as more people get COVID-19 vaccinations, the CDC likely won't oblige.

The cruise line industry has been going through a tough phase. All of the companies have been posting minuscule revenues since cruise activity is barred in most jurisdictions. In fact, Royal Caribbean posted negative revenues in the third quarter of 2020 due to adjustments related to previous quarters.

During Carnival’s first-quarter business update, markets will watch for details about the company’s financial health and its plan to strengthen its balance sheet. The company will also provide details on its cash burn rate. All of the cruise companies have been burning a lot of cash over the last year.

In March, Costa Cruises, CCL's Italian company, announced that it would restart its operations in May. The same month, P&O Cruises Australia said that it would pause its operations until the end of July.

In 2020, CCL suspended its dividends and share repurchase program. Cruise line companies, including Carnival, are burning millions of dollars every month. They had to resort to debt and equity issuances to keep themselves afloat. Given the precarious financial position, dividends should be the last thing that CCL investors should expect.

According to the estimates compiled by MarketBeat, CCL’s median target price is $21.44, which is a discount of 20 percent over the current prices. Its highest target price is $42.10, which is a premium of almost 57 percent. CCL’s lowest target price of $10 is a 62 percent discount over the current prices.

Among the 20 analysts covering CCL stock, only eight recommend a buy, while six recommend a sell or lower. Seven analysts recommend the stock as a hold. Last week, Citigroup initiated coverage on CCL stock with a buy rating and a $30 target price. In March, UBS upgraded the stock from a neutral to buy and raised its target price to a street high of $42.

In March, Macquarie and Bank of America upgraded Carnival stock. Truist and JPMorgan Chase also boosted their target prices.

CCL is among the best ways to play the reopening story. Cruise line stocks were among the bottom performers in the S&P 500 in 2020. However, cruise stocks have rallied amid the increasing pace of vaccinations and the shift from growth to value stocks.

There's still uncertainty about the resumption of cruise activity given the still-evolving COVID-19 pandemic situation. Many parts of the world are witnessing another wave of infections despite the ongoing vaccinations. After the sharp rally from the bottom, CCL stock looks stretched now. Investors might be better off selling the stock now and taking the profits off the table for now.