Shares of Carnival (NYSE:CCL) (NYSE:CUK) stock are down 2.1% as of 10:20 a.m. EDT on a day of mixed news for the cruise line company.
The good news for Carnival today is that investment bank HSBC has just raised its price target on the stock to $18.30 — a 24% hike from its old target, according to TheFly.com.
But then there’s the bad news, and it comes in two parts. Part 1 is, of course, that Carnival Corporation stock already costs $22 a share. Thus, HSBC’s new price target, while a bit higher than its old price target, still forecasts a 17% decline in share price, which is obviously not good for the stock — and the reason why HSBC maintains a reduce (i.e., sell) rating on the stock.
As HSBC explained, while it’s true that cruising has resumed in the United States and Europe, the amount of business Carnival is getting so far is “not material” to hopes that the company will turn profitable again.
And this news gets worse. Earlier this week, NBC Miami ran a story relating how passengers aboard Carnival’s first batch of restarted cruises are “frustrated” with the company’s COVID-19 protocols.
In particular, parents of unvaccinated children under 12 years of age say that there is “nothing for the kids to do at all, besides the pool” and that kids couldn’t get off the ship when it visited ports. Carnival apparently warned passengers prior to boarding that this would be the case, but this message got lost in the fine print, and has proved to make the cruising experience less pleasurable than it once was.
As one passenger summed up:
We had some fun. It definitely was an experience and we learned from it. We won’t do it again.
If future would-be passengers rethink signing on for a Carnival cruise because of this, investors might have the same thoughts about buying Carnival stock: They won’t do it again.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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