HSBC Raises Carnival to Buy with $30.10 Target, Sees 19% Upside
HSBC upgraded Carnival to Buy from Hold with a $30.10 target implying 19% upside while cutting 2026-27 earnings forecasts by 9% due to projected 20% higher fuel costs. It cited net yield up 2.7% y-o-y, adjusted EBITDA +5.1%, $7.5bn in deposits, a $2.5bn buyback and 85% of 2026 bookings secured.
1. Analyst Upgrade and Price Target
HSBC upgraded Carnival from Hold to Buy and set a $30.10 price target, implying a potential 19% share-price upside based on a 9.0x EV/EBITDA multiple. The new rating reflects HSBC's view that Carnival's risk-reward profile is favourable despite fuel cost pressures.
2. Operational Metrics
Carnival's fourth-quarter net yield rose 2.7% year over year and onboard spending jumped 8.3%, contributing to a 5.1% increase in adjusted EBITDA. Customer deposits climbed 9% to $7.5 billion, bolstering liquidity as core demand remains robust.
3. Earnings Forecast Revisions
HSBC trimmed its 2026 and 2027 earnings forecasts by approximately 9%, primarily attributing the cuts to average fuel expenses estimated 20% above prior assumptions. Capacity is expected to grow 1% annually, with net yield growth forecast at 3.6%.
4. Financial Discipline and Bookings
Management has launched a $2.5 billion buyback program and projects leverage falling to 2.6 times by 2027, down from 7.0 times in 2023. Carnival has secured 85% of 2026 bookings at healthy pricing, underscoring resilient demand and improving financial discipline.