Carnival (NYSE:CUK) (CCL), and the broader cruise line space, have struggled to bounce back from the COVID-19 crash.
While shares of many companies have surged above and beyond pre-pandemic highs, the cruise lines have had to continue dealing with rough waters.
For Carnival, the COVID situation has improved modestly over the past year and a half.
Still, it's too soon to determine when the pandemic will make a move into its endemic stage. Regardless, Carnival is capable of improving upon its operations amid COVID, and for that reason, I am bullish. (See Carnival stock charts on TipRanks)
Risky Bet
Any localities that have attempted to treat COVID as an endemic have since regretted their decisions. More variants can be expected over the year ahead, and for that reason, cruise lines, which are arguably one of the riskiest reopening stocks, remain clouded in uncertainty.
This could change with the advent of a breakthrough COVID treatment, such as an oral treatment under development by Comirnaty COVID-19 vaccine producer Pfizer (NYSE:PFE). Such a breakthrough could propel cruise line stocks vertical over a short time span.
However, even if a pill were to get the green light next year, there's still no telling if certain groups would be willing to take it. As such, investors must be cautious when attempting to bet on a parabolic move in a name like Carnival, despite the resumption of cruising.
Steady Improvements
Last week's news of an earlier-than-expected return of the brand-new Seabourn Encore cruise ship bodes well for operations amid COVID.
Carnival has also shored up its balance sheet with the divestment of various aged cruise ships. Undoubtedly, the liquidity and solvency situation has improved, with the company now boasting a 1.2 current and quick ratio.
Indeed, the sails look set for Carnival to cruise back to its pre-COVID highs. Advance bookings are up, and more pent-up demand will likely have a chance to be met between COVID waves.
Things are finally looking up, though new variants and future waves could spoil the recovery.
Wall Street's Take
According to TipRanks' consensus analyst rating, CCL stock comes in as a Hold. Out of eight analyst ratings, there are three Buy recommendations, two Hold recommendations, and three Sell recommendations.
The average Carnival price target is $28.04. Analyst price targets range from a low of $18.30 per share, to a high of $39 per share.
Bottom Line
Analysts don't expect smooth sailing from Carnival stock, with as many Sells as there are Buys assigned.
Still, for those optimistic that cruising can operate somewhat efficiently in the new normal, the risk/reward in a resilient cruise line like Carnival may seem too good to pass up.
Disclosure: Joey Frenette doesn't own shares of any mentioned companies at the time of publication.
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