Morgan Stanley analyst Jamie Rollo lowered the firm’s price target on Carnival to $7 from $13 and keeps an Underweight rating on the shares after reducing forecasts “again” following the company’s “weak” Q2 results and guidance. His FY22 EBITDA forecast has been cut to a ($0.9B) loss due to weaker than expected occupancies, weakening pricing, elevated unit costs and higher fuel costs, noted Rollo, who points out he now expects this to be Carnival’s third year of losses. In addition to cutting his price target “nearly in half,” Rollo is introducing a new $0 bear case, noting that the company has $4B of debt maturing in the next 18 months and $5B of its cash is customer cash. If the high yield market closes, or if there is “a demand shock that causes trip cancellations or weak bookings” followed by customer deposit outflows, “liquidity could quickly shrink,” the analyst tells investors.
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