Carnival stock has emerged as one of the top 10 performers in the S&P 500 this year, and according to Melius Research, it still has significant potential for growth. Melius analyst Conor Cunningham recently upgraded the cruise operator’s stock (ticker: CCL) from Hold to Buy, while maintaining a target price of $19. This implies a potential gain of 32% from the stock’s Friday closing price of $14.41.
Carnival and its competitors have experienced a remarkable rebound this year as Americans seek to make up for lost travel opportunities during the pandemic. Royal Caribbean (RCL) is also performing exceptionally well, with a 115% increase in stock value, ranking it as the third-best-performing S&P 500 stock this year. Although Carnival is currently ranked tenth, it has seen a remarkable gain of almost 82%, despite its price still being less than one-third of its pre-pandemic level in early 2020.
Melius Research’s Conor Cunningham stated that the demand for cruise vacations has rebounded aggressively and is expected to continue gaining momentum into the next year. He believes that there will be a record-breaking demand for cruises in 2024, accompanied by record prices.
However, there are potential factors that could hinder the stock’s rally. The cost of fuel, a significant expense for cruise lines, has been fluctuating throughout the year. Additionally, if OPEC decides to reduce oil production at an upcoming meeting, it could drive up oil prices and negatively impact the stock. Another concern for Carnival and other cruise operators is the escalating Israel-Hamas conflict, which could lead to customer cancellations due to fears about a larger war.
Closer to home, any updates on Carnival’s Black Friday and Cyber Monday booking volumes will likely have an impact on the stock. Investors eagerly await the company’s fourth-quarter results, which are scheduled to be released on December 30th.