Analysts at Berenberg lowered cruise operator Carnival from ‘hold’ to ‘sell’ on Friday, citing significant headwinds for the industry not yet factored into the group’s current share price.
Berenberg said it fully expects pent-up demand for the industry to be “a significant tailwind” for the cruise sector in 2021 but stated that after looking at the overall enterprise value, Carnival has fallen a modest 1.5% since the end of 2019.
“We do not think this is a fair reflection of the increased risks faced by the operators, not least of which is the further transfer of value from shareholders to debtholders through the remainder of the suspension of service,” said the analysts.
The German bank, which raised its target price on the stock from £8 to £10, noted that after looking at the three-year forward multiples for Carnival relative to where its shares were currently trading, it saw they were at “a meaningful premium”.
“Carnival is still trading at a comfortable premium to our three-year forward multiples prior to the pandemic and more in line with RCL. In context, we have Carnival trading at 15x 2023 earnings which would be the top end of it historical range compared to an unrealistic 28x at the current share price,” concluded Berenberg.
