Carnival PLC's (LON:CCL) share price seems to be in a “parallel universe” where the coronavirus pandemic does not exist, analysts at Berenberg said.
Based on 2022 estimates, shares in the cruise operator are trading for 23 times consensus earning — a 137% premium to the end of 2019.
“For our part, we consider Carnival's capital structure to be unsustainable and in need of a fresh injection of equity, the valuation highly unattractive and the shape and extent of the recovery of the industry far from certain,” the analysts said in a note before the FTSE 100 company released its quarterly results late on Thursday morning.
Berenberg’s rating on Carnival PLC was downgraded to ‘sell’ with a price target of 800p from 1,180p.
Even if Carnival moderates new ship orders, which the second-quarter results confirmed, the analysts said leverage will be over five times in 2022 and they would not expect sufficient cash flow to make any shareholder distributions until at least 2025.
“This will be important given that the $16bn returned over the last decade was an integral part of the equity story.”