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Carnival Plunges as Morgan Stanley Says Another Demand Shock Could Send Shares to $0

Stock Markets Jun 29, 2022 07:37AM ET
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© Reuters. Carnival Plunges as Morgan Stanley Says Another Demand Shock Could Send Shares to $0

By Senad Karaahmetovic

Morgan Stanley analyst Jamie Rollo has remained cautious on the Underweight-rated Carnival Corp. (NYSE:CCL) shares after another “chunky forecast cut.”

The analyst slashed the price target to a new Street-low of $7.00 per share from $13.00 to reflect the lowered FY22e EBITDA guidance and mirroring “weaker than expected occupancies, weakening pricing, elevated unit costs, and higher fuel costs.”

The analyst also slashed the 2H22 forecast for revenue by 15% on pressures led by a later-than-expected return to a 100% resumption.

Rollo also introduced a new bear case of $0 in case a new major demand shock is to materialize.

“If the high yield market closes, and/or if there is a demand shock that causes trip cancellations or weak bookings (and hence customer deposit outflows), liquidity could quickly shrink. Even then, leverage looks unsustainably high we think, with net debt remaining >$30bn for the foreseeable future, nearly triple its pre-Covid level. We think this needs to come down to under 4xFY23, to ~$20bn or so, which implies a ~$12bn equity raise. This is similar to CCL's market cap, so could require a material, and therefore likely very dilutive, discount. If its equity value drops much further, it could become very challenging to raise this much,” the analyst concluded.

Carnival Plunges as Morgan Stanley Says Another Demand Shock Could Send Shares to $0
 

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Comments (4)
Sasha ZZ
Sasha ZZ Jul 21, 2022 11:11AM ET
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Maybe Morgan in short pos on ccl, or want to buy by 5.8 p/sh? 🤔🤔, realy... K11
Rawling and Mason Meagher
Rawling and Mason Meagher Jun 29, 2022 2:54PM ET
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bankruptcy would only help...
Juan Gutierrez
Juan Gutierrez Jun 29, 2022 1:37PM ET
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Industry is in way better shape than two years ago.  Additionally, every single stock has the potential to go to $0.  I would like to see next week comments about Carnival.
Lionel Laurent
Lionel Laurent Jun 29, 2022 7:58AM ET
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Escroc Jamie rollo
 
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