Carnival Stock Price Forecast: Financial and Technical Analysis

• The company, after facing losses during COVID, is showing improvements in its earnings report.
• The price is on the same level as its 50-day EMA; what’s next?

Carnival Corporation & plc is a publicly traded company listed on the New York Stock Exchange. Its primary business involves cruise operations spanning North America and Australia (NAA) Cruise, Europe, and Asia (EA) Cruise Operations. The company also engages in cruise support, as well as tours and other related activities. Established in 1972, Carnival Corporation & plc is presently under the leadership of CEO Josh Weinstein.

Financial Analysis Of Last Year’s Annual Report

After struggling during the COVID outbreak, Carnival has made a turnaround with sky-high revenue growth of 537%. Although the company couldn’t stay gross profit positive as the Cost of goods sold (COGS) was just above the  revenue limit, the firm has still shown a gross profit growth rate of 67% 

The company has also experienced cash outflows due to various indirect expenses, including salaries and marketing efforts, resulting in operating losses, followed by net profit losses.

However, despite the current negative profitability, the positive growth and turnaround trends in revenue provide a more optimistic outlook. It’s reasonable to anticipate that the company could recover from the negative figures in the next one or two financial years, as it had done before the onset of the COVID pandemic.

The balance sheet of the firm remains solid, particularly on the assets side. However, it’s worth noting that the company has significantly increased its long-term debt over the last five years. It’s important to highlight that before the COVID outbreak, Carnival was a company with positive net cash flow.

As of now, the operating cash burn has ceased, preventing further impact on the balance sheet. Additionally, based on the income statement and the trailing twelve-month (TTM) figures, the company has returned to a positive cash flow from operations, indicating a positive trend in its financial performance.

Key performing financials

The Revenue of Carnival as posted in its annual report is $12 Billion, which reflects an incremental growth of 537% as compared to the previous year.

The Gross profit of Carnival as posted in its annual report is -$1.42 Billion, which is a result of the cost of goods sold exceeding the revenue.

The Operating profit of Carnival as posted in its annual report is -$3.92 Billion. 

The net income of Carnival as posted in its annual report is -$6.09 Billion.

The stock has given consistent dividends of an average of $2 per share which was discontinued after the covid recession.

Profit margins:

The Gross profit margin of Carnival as posted in its annual report is -11%

The Operating profit margin of Carnival as posted in its annual report is -32%

The net margin of Carnival as posted in its annual report is -50%

Debt ratios:

The company is extremely high on debt as per its Debt to equity ratio of 5.08

The figures and the KPIs are calculated by the annual report of the firm.

Technical Analysis of Carnival Stock

What Made the Price Go In An Uptrend?

Carnival’s stock price embarked on a trend reversal following the release of its annual report from the previous year. As indicated by the financial data provided earlier, the company’s revenue demonstrated a remarkable growth of 537% compared to the prior year. Furthermore, the quarterly reports also revealed substantial growth, with each quarter showing more than a twofold increase in revenue.

These positive figures reflected Carnival’s recovery from the severe impact of the Covid recession, during which its growth had declined by more than 139% compared to 2019. Notably, the company managed to minimize its operating losses significantly compared to the years 2019 and 2020, which is a promising sign that it is on track to achieving net profitability.

This improvement in financial performance has instilled a sense of confidence and security among Carnival’s investors. The sustained buying activity observed over the course of 10 months is a clear indication of this growing investor confidence in the company’s recovery trajectory.

Current Price Action and Predictions

At the time of writing, Carnival’s stock price is seen falling down after touching its resistance level, and the bears have driven the price down to $16.1, with various support and resistance levels in sight. The indicators are also providing some valuable insights for the near future.            

Support: The first and the immediate support level for carnival stock is at $16.30; however, it is seen that one candle on the daily time frame has crossed it with a possible chance of deviation.

The second support for the stock is seen at the price value of $14.64, and this level seems to have more volume than the nearby levels as Carnival stock has taken support from this level during its bullish rally back in June 2023.

Resistance:  The first and the immediate resistance level is at $18.8 where Carnival stock was seen to make two touch points recently. The second resistance level was formed more than a year ago during April 2022.

MACD: The MACD chart reflects a downtrend after the signal line crossed above the MACD line, signaling a bearish momentum in the stock. Currently, the MACD line is at -109 and has crossed the neutral value of zero, while the signal line is at 0.164.

RSI: The RSI graph exhibited strong bullish strength in June and July when the stock’s RSI levels exceeded 70. However, since July, the RSI has undergone a continuous bearish trend, even dropping below the neutral territory. At present, the RSI line is at 39, with its SMA at 50, pointing toward weak pricing strength.

EMAs: The 50 EMA crossed over the 200 EMA in June 2023, indicating a bullish momentum. Currently, the stock price and the 50 EMA are converging, which could result in various outcomes. The current levels show the 50 EMA at $16.18 and the 200 EMA at $13.25.

Is Carnival Stock Worth Buying?

Investors’ point of view: Given the current financial trends and the improvements observed in the trailing twelve months, there is a strong likelihood that the company will achieve net profit positivity in the near future. The healthy cash flow further supports this positive outlook. While the company’s debt levels might raise some concerns, it’s important to consider that the business operates in an asset-heavy industry. In such industries, long-term investments are often beneficial and can help facilitate growth and stability over time.

Trading point of view (short and medium term):

The price prediction for Carnival indicates that the next move of the stock is crucial. With the current price aligning with immediate support and the level of the EMA, there is potential for a positive scenario. If the stock successfully finds support from its 50 EMA and manages to rise above it, this could trigger a buying opportunity. On the other hand, if bearish sentiment prevails, the stock may experience a downward movement, possibly heading towards its second support level. 

Conclusion

Carnival Corporation, established in 1972, operates in the cruise operations business. The company faced challenges during the COVID-19 pandemic, resulting in a period of net profit negativity. However, recent improvements reflected in the last annual report have contributed to the rise in the company’s share price.

Long-term investors might find Carnival an attractive option considering the positive trajectory in the company’s financials. On the other hand, for medium and short-term traders, a cautious approach is advisable. Monitoring the stock’s behavior relative to its 50 EMA and support levels will be crucial to making informed trading decisions. 

Technical levels

Support: $16.3, $14.64

Resistance: $18.86, $20.49

RSI: 39

50 EMA: $16.18

200 EMA: $13.25

Disclaimer

The views and opinions stated by the author, or any people named in this article, are for informational purposes only. They do not establish financial, investment, or other advice. Investing in or trading crypto assets comes with a risk of financial loss.