Carnival Cruise Line stock falls after Macquarie cuts price target to $10

Yahoo Finance's Brian Sozzi and Brad Smith discuss Macquarie's call on Carnival Cruise Line and the outlook for other cruise stocks.

Video Transcript

BRIAN SOZZI: We're also sailing into shares of Carnival Corporation, moving this morning after Macquarie analyst Paul Golding lowered his price target of the cruise company from $12 down to $10, noting concerns over supply and demand in Europe, as well as persistent cost and cash flow headwinds.

I like Paul. We've talked to Paul before. I always enjoy his research, but this is a tough call, keeping an outperform rating on Carnival after the stock fell 23% last week after, really, a shocking miss here. I mean, revenues for the quarter came in $4.3 billion. The Street was at $4.9 billion. Adjusted operating profits, 303 million. The Street was that close to 800 million.

So this is a tough call, I think, in part, perhaps, made because there's no near-term liquidity concerns for Carnival. It looks like they have about $7.4 billion in total liquidity. That is a good thing. But again, the quarter not good, and also the bookings not shaping up to be too good for Carnival.

BRAD SMITH: And on the topic of bookings, right now, major cruise lines are doing everything they can to try and get people back on board. That's everything from relaxing some of the restrictions and testing and vaccination requirements. You're also seeing them put out some extreme deals, which you expect that they would take losses on over the longer term, unless they are able to eventually kind of take those prices back up.

But that's really going to come with some of the re-engagement campaigns that we talked time and time about. To put some numbers on this, there was actually a study on this from the Points Guy. One three nights sailing at Carnival, $99, only 100 bucks.

BRIAN SOZZI: $99.

BRAD SMITH: Not per day.

BRIAN SOZZI: For a week?

BRAD SMITH: The entire voyage.

BRIAN SOZZI: Wow.

BRAD SMITH: Three nights, three nights sailing at Carnival selling for 99 bucks. And then at one major-- well, actually, Carnival Cruise Line also has some four-night fall sailings as low as $26 per day.

BRIAN SOZZI: Brad, I'm out of here, dude.

BRAD SMITH: You're going?

BRIAN SOZZI: I'm getting out of here. I mean, $99 cruise. I'll see you later, man. Pretty good. Yeah, that's a sweet deal. That is-- that's really good, but--

BRAD SMITH: It's still not going to get me on a cruise.

BRIAN SOZZI: No, it's going to hit-- look, it's going to hit Carnival's profit margins. The next catalyst for this space could come tomorrow. We're going be talking to Norwegian Cruise Line's CFO. I would not be surprised if they come out with guidance ahead of that interview. I think they're getting also ready to launch a new ship called the "Primo" at a time with all this discounting.

BRAD SMITH: Oh, yeah, exactly.