UPDATE: Credit Suisse Upgrades Carnival Corporation (CCL) to Outperform

(Updated - April 9, 2021 4:36 AM EDT)

Credit Suisse analyst Benjamin Chaiken upgraded Carnival Corporation (NYSE: CCL) from Neutral to Outperform with a price target of $40.00 (from $18.00).

The analyst comments "There are 4 drivers that we think cause CCL to outperform. (1) CCL is disposing of 19 ships, which will drive 4% better unit economics and 3% better fuel economics. Currently, street estimates show ’22 cruise costs (NCC) ~flat with 2019. (2) We think sentiment is changing at CCL internally around shore side costs (i.e., land-based expenses), opening the door to further cost enhancements (e.g., more efficient marketing, potentially lower headcount). CCL has not quantified this tailwind, but we think a tailwind of 5% or more is reasonable. For example, timeshare company VAC is reducing cost by ~$75m (specifically related to COVID efficiencies), which we think equates to a 20%+ reduction in G&A. Keep in mind, VAC was already a high-performing, lean company and was able to find material costs cuts; this also aligns directionally with improvements at other large organizations (e.g., MAR recently found 15% savings). (3) CCL has multiple tranches of debt at 10%+ rates, which present the opportunity to refinance, which would represent potential upside to our estimates. While there is a debate on if/when to call debt, there are still somewhat near-term opportunities that could benefit the stock. For example, CCL has $4bn of 11.5% debt due 1H’23, currently trading at $115, which alone could be $0.20 accretive at more recent rates. (4) Easy comparisons story in Europe, which was a material drag for CCL prior to COVID."

For an analyst ratings summary and ratings history on Carnival Corporation click here. For more ratings news on Carnival Corporation click here.

Shares of Carnival Corporation closed at $28.56 yesterday.

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