Could CCL stock double in value again? Morgan Stanley weighs in

Investing.com -- Carnival Corp. could double in value from current levels under a bullish scenario, according to Morgan Stanley, which raised its price target on the cruise operator to $30 from $24 in a note Wednesday.

Morgan Stanley said it sees scope for a major rerating across cruise stocks, helped by slowing capacity growth, improving products such as private islands, and favourable fuel and currency trends.

“Our new bull cases suggest CCL could double again ($60),” the analysts wrote. They added: “CCL has implemented some bold and sensible actions to rationalise its fleet, focusing on its highest returning brands, and boosting the eponymous Carnival (NYSE: CCL) brand with Celebration Key.”

The firm sees Carnival offering “catch-up potential” on both revenue and margins, noting the company is “only just back to FY19 margins, which were themselves depressed relative to FY16-18.”

Morgan Stanley also pointed to rapid deleveraging at Carnival, helped by a limited new ship pipeline. “Leverage to fall from 4.5x in FY24, to 3.8x in FY25e to 3.0x in FY26e, after when it should be back to investment grade,” the note said.

While the analysts kept an Equal-weight rating due to downside risks in a recession scenario, they highlighted the stock’s upside potential.

“If we benchmark CCL against the best-in-class KPIs of its peers... $4 of EPS is feasible, and 15x P/E gives a $60/4,400p bull case.”

Morgan Stanley concluded: “CCL offers the most exciting upside potential for investors who believe in ongoing yield strength and operational outperformance.”

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