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Carnival Stock Could Fall to $0 in a Worst-Case Scenario, Analyst Says

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Carnival Dream cruise ship is docked at Port B in Key West, Florida.

Chandan Khanna/AFP via Getty Images


Carnival

stock was tumbling Wednesday after Morgan Stanley cut its price target to a Wall Street-low, saying it sees the case for a stock wipeout.

Morgan Stanley analysts slashed their base case price target to $7, according to Bloomberg, and maintained an Underweight rating on the stock. In a worst, or “bear case” scenario, Carnival’s (ticker:


CCL

) price could reach zero, they added.

The cruise line’s stock could lose all its value if a recession triggers another demand shock, the analysts said in a research note reviewed by Bloomberg. The group’s liquidity could “quickly shrink” if bookings slow or customers withdraw deposits amid a bout of cancellations, the analysts wrote.

A Carnival spokesperson said the company was “making strong progress” as it continued to restart its fleet around the globe.

“There is pent-up demand for cruising and our occupancy levels continue to rise with our Carnival Cruise Line brand at 100% last quarter and forecasting 110% occupancy for the third quarter,” the spokesperson said in an emailed statement.

Carnival stock was down 15% to $8.78 on Wednesday. The shares have lost 56% this year. While they tried to stage a rally when Carnival posted earnings last week, reporting a sharp rise in revenue and booking improvements, they dipped back down this week after Stifel and Wells Fargo both lowered their price targets.

Stifel maintained a Buy rating on the stock, while Wells Fargo kept an Underweight rating. Of the 25 analysts covering the stock, 32% rate it a Buy equivalent, 48% rate it a Hold, and 20% rate it Sell, according to FactSet.

Other cruise stocks were tumbling Wednesday, with


Royal Caribbean

(RCL) down 8.9%, and


Norwegian Cruise Line

(NCLH) falling 9%.

Write to Sabrina Escobar at sabrina.escobar@barrons.com

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