Just as Carnival PLC (LSE:CCL), the cruise line company, is able to record its first quarterly profit since the pandemic, Peel Hunt downgrades the stock, in turn sending shares 6% lower on Tuesday.
Having posted third-quarter results last week, Carnival was able to impress shareholders with over US$6.8 billion in revenue and a net income of US$1.07 billion.
It is expected for a company which relies on the summer holidays and seasonality for the majority of its business that the three months to August 31 would be the group’s most important and impressive.
Analysts at Peel Hunt Ltd (AIM:PEEL) even estimate that underlying profits in this quarter account for 53% of full-year figures, with the boutique investment bank predicting no more material trading news until the next financial year.
Despite reporting higher demand, improved pricing, a strong pipeline of future bookings and a reduction in fuel consumption, Peel Hunt still remains concerned about the group’s debt pile, which is expected to sit at US$31 billion by the end of the year.
“Carnival is undervalued in our view, but operating and financial leverage lead us to an ‘Add’ recommendation,” Peel Hunt said.
Lowering the target price from 1,400p to 1,100p, the investment group said Carnival “probably has good prospects for next year, but we will have a chance to take a view in Spring.”
Shares in Carnival are up over 56% in 2023, having closed trading on Tuesday at around 928p.