Buy this cruise line operator that’s trading at a discount, says HSBC
Carnival is trading at a discount due to volatility in fuel prices linked to the Iran war and investors should scoop up the stock, according to HSBC. The bank upgraded the cruise operator to buy from hold. It trimmed its price target on shares to $30.10 from $33.60, though that still suggests about 24% upside from Friday’s close. “While volatility [is] likely to remain near term, we see shares attractively valued,” HSBC analyst Meredith Prichard Jensen said Friday in a note to clients. “We think the current share price largely reflects fuel-related risk.” Carnival is susceptible to swings based on fuel price hikes related to the Iran war, given its “unhedged exposure” to the resource, according to HSBC. Since the beginning of the Middle East conflict in late February, Carnival has shed 23.3%. “We acknowledge greater near-term earnings uncertainty versus peers, like RCL , which benefit from derivative protection,” Jensen wrote. However, the analyst pointed out that the stock trades at around 10 times forward earnings, well below a two-year average of 12.4. Jensen noted that the cruise ship line is likely to weather operational challenges posed by the conflict in the Middle East due to its strong value proposition and its ability to remain flexible to shifting demands. “The market is underestimating the resilience of experience-led demand (CCL has c85% of 2026e booked at healthy pricing), the strong value proposition (c25% discount to land-based vacations), and its fleet of mobile assets able to shift deployment according to demand,” HSBC wrote. Shares have plunged 23% over the past month, massively underperforming the overall market. However, the stock is still up nearly 22% in the past year.