Friday, UBS analysts reiterated their Buy rating on Carnival Corporation (NYSE:CCL) shares, maintaining a $31.00 price target, well within the broader analyst range of $14-$35. Trading at $25.43, CCL is currently deemed slightly undervalued according to InvestingPro analysis. The firm's assessment highlighted the potential financial benefits from the company's new private island destination, Celebration Key. According to UBS, Royal Caribbean (NYSE:RCL)'s CocoCay island demonstrated a return of approximately 40% on an annualized basis in its initial months, contributing an incremental $100 million in EBITDA.
Carnival's larger brand base means the yield impact from Celebration Key would need adjustment. With a robust EBITDA of $6.1 billion and an impressive 59.27% return over the past year, the company shows strong momentum. UBS anticipates that with higher on-island spending in 2025 compared to 2019, and the island's opening with more amenities than CocoCay initially had, Carnival could generate around $150 million in EBITDA in its first full year. InvestingPro data reveals the company maintains a GREAT financial health score, suggesting solid operational execution. This equates to a 30% return on the company's $500 million investment, potentially increasing Carnival's yield by 100-160 basis points annually starting in late 2025 but more significantly for the fiscal year 2026.
The analysts estimated that every percentage point of yield improvement could add $0.14 to Carnival's earnings per share in 2026. UBS noted that if Carnival invests an additional $100 million to double the island's docking capacity, the returns could increase substantially from 2026 onwards. Although the capacity expansion to Celebration Key may not be completed until 2028, which would require additional amenities to support the increased capacity, this could introduce a second layer of yield improvement of 100-160 basis points by 2028.
UBS's outlook for Carnival is positive, suggesting that the introduction and expansion of Celebration Key could provide a considerable boost to the company's financial performance in the coming years. The analysts' maintained price target of $31.00 reflects this optimistic view on the stock's future trajectory. Notably, InvestingPro reports that 12 analysts have recently revised their earnings expectations upward, with comprehensive analysis available in the Pro Research Report, offering deeper insights into CCL's growth potential.
In other recent news, Carnival Corporation has seen several adjustments to its financial outlook from analysts at Truist Securities and Stifel. Truist Securities revised Carnival's price target to $30, maintaining a Hold rating, while Stifel maintained their Buy rating and set a price target of $34. Both firms made these adjustments following Carnival's recent fourth-quarter earnings for the 2024 fiscal year.
In addition, Carnival's board member Sara Mathew has decided not to seek re-election and will step down from her position in April 2025, with no specified successor yet. Meanwhile, the company's net debt to adjusted EBITDA ratio, which stood at 4.3x at the end of fiscal year 2024, is projected to decrease to 3.8x by the end of FY2025.
Truist Securities highlighted Carnival's strategic focus on its top-performing brands and debt reduction, while Stifel analysts suggested that the company's yield assumptions for 2025 to 2027 might be too conservative. These are all recent developments that investors should take note of. Please note that these are facts from past articles and not personal opinions or predictions.
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