Carnival valuation 'highly unattractive', says Berenberg

Carnival slumped on Thursday after Berenberg downgraded its stance on shares of the cruise operator to ‘sell’ from ‘hold’ and slashed the price target 800p from 1,180p.

Berenberg said Carnival’s capital structure was unsustainable and in need of a fresh injection of equity, the valuation highly unattractive and the shape and extent of the recovery of the industry far from certain.

"Looking at the Carnival share price we feel we are in a parallel universe where leverage and net debt are materially higher, valuation multiples have corrected upwards and Covid-19 does not exist," it said. "We estimate that based on 2022 estimates, Carnival is trading on 23x consensus price-to-earnings and an EV/EBITDA of 8.6x - a 137% and 17% premium to the end of 2019 - while on our estimates the P/E is over 24x."

It said that while Carnival has announced that a limited number of ships will sail in August, the recent extension of the suspension by its competitor Norwegian Cruise Line until the end of September raises the risk that the return of the industry is going to be slower than it expects.

"We expect that Carnival will not have a full fleet sailing until into 2022," Berenberg said.

At 0840 BST, Carnival shares were down 5.8% at 1,201.18p.