Carnival Shares Gain Favor as Analyst Shifts Stance

Morgan Stanley upgrades Carnival to Overweight, citing improved valuation after share drop. Upcoming earnings report on March 27 is the next key catalyst.

A significant upgrade from Morgan Stanley has arrived for Carnival shares, which have declined approximately 18% since the start of the year. According to analyst Jamie Rollo, the pendulum has now swung the other way. He argues that the recent share price decline has more than compensated for lowered profit expectations, creating an attractive risk-reward profile once again.

Revised Target Amid Improved Outlook

In a move that may seem contradictory at first glance, Morgan Stanley has raised its rating on Carnival from "Equal Weight" to "Overweight" while simultaneously trimming its price target from $33 to $31. The rationale lies not in improved fundamentals, but in a more favorable valuation following the stock's pullback. Rollo also cites Carnival's relatively lower exposure to the Middle East compared to its peers as an additional advantage in the current tense geopolitical climate.

Historical patterns show that cruise line equities have frequently staged robust recoveries following pronounced sell-offs. The upcoming quarterly report, scheduled for March 27, will indicate whether this trend is poised to repeat.

Upcoming Earnings Report as Key Catalyst

Market consensus anticipates earnings per share of $0.18 and revenue of approximately $6.13 billion for the quarter. Carnival's own most recent guidance was set at $0.17 per share, placing the expectation just above the company's forecast. Looking further ahead, the consensus estimate for the full 2026 fiscal year stands at $2.48 per share.

The central focus during the conference call on the morning of March 27 will be whether management reaffirms its annual guidance in light of current market conditions. Fuel expenses remain a persistent structural risk: every $10 per barrel movement in oil prices has a material impact on annual earnings. Carnival currently maintains only limited hedges against this volatility. Furthermore, the financing costs for the debt-laden company remain elevated, influenced by the Federal Reserve's interest rate policy, which held steady at its last meeting.