Carnival (CCL) shares are inching higher on April 8 after a sudden de-escalation in the Middle East sent waves of optimism through the entire travel sector.
As the U.S. and Iran agreed to a two-week ceasefire contingent on the Strait of Hormuz remaining open, CCL rallied and challenged its 50-day moving average (MA) on Wednesday morning.
A clear break above $28.53 is now expected to accelerate bullish momentum in the near-term. Note that Carnival stock is still down about 17% versus its year-to-date high.
For cruise operators like Carnival, a ceasefire is the ultimate risk-on signal.
CCL shares rallied today mostly because of the dramatic collapse in crude oil prices, which crashed to about $94 a barrel as President Donald Trump agreed to hold back a threatened attack on Iran.
Because Carnival does not heavily hedge its fuel costs, lower oil prices drop straight to its bottom line — significantly easing margin pressures that have plagued the industry since February.
Meanwhile, the reopening of the Strait of Hormuz restores consumer confidence in global travel itineraries as well.
All in all, now that the “geopolitical tax” has been removed — at least for the time being — investors are pivoting back to CCL’s record-breaking Q1 earnings and robust booking volumes.
Also on Wednesday, senior Mizuho analyst Ben Chaiken maintained his bullish view on CCL, citing the firm’s “almost zero” footprint in North America to Europe travel and “no fuel hedging.”
Chaiken expects Carnival to generate a whopping $2 billion in free cash flow by 2027, a milestone he believes is “fundamentally underappreciated.”
Despite recent tensions in the Middle East, CCL’s long-term earnings power remains intact, driven by strong onboard spending and the buildout of “Celebration Key,” he told clients.
With Carnival shares trading at a discount to peers like Royal Caribbean (RCL), Chaiken sees the technical breakout attempt as an attractive entry point for long-term investors.
Other Wall Street analysts agree with Ben Chaiken on Carnival Corp, especially since it currently pays a dividend yield of 2.13% as well.
