Carnival Cruise Lines Stock Forecast: CCL bulls being pushed back toward 2020 lows

• Carnival Cruise Lines may make Thursday its fourth day straight of losses.
• CCL stock cratered 14.1% on Wednesday.
• Carnival Cruise Lines was downgraded by Morgan Stanely, given $7 price target.

Update: Carnival Cruise Lines (CCL) stock fell on Thursday and is in the throws of leaving behind an M-formation in the daily chart that could be critical in the days ahead. The pattern is a reversion formation where the price would be expected to revisit the neckline on any further downside from this juncture. This makes $9.22/9.74 an important area at this juncture for the sessions ahead. Above there, the bulls can hunt down $10.18 where there is an imbalance of price on the daily chart. On the downside, $7.51 could be visited on a break of the 2020 lows of $7.80.

Carnival Cruise Lines (CCL) stock traded down more than 3% in Thursday's premarket and opened down 4% to $8.50. If it stays there, it will amount to the fourth session in a row of share price losses for CCL. Besides worries over a recession, a major investment bank supplying a dreaded downgrade on Wednesday has not helped the situation.

Carnival Cruise Lines Stock News: Could CCL survive another shock to demand?

CCL cannot catch a break it seems. Although Morgan Stanley already had an Underweight rating on CCL shares, the target price was lowered to $7 on Wednesday from $13 with analyst Jamie Rollo saying that the company would potentially go bankrupt in the event of another demand shock. 

Shares fell by 14.1% on Wednesday to close at $8.87 after the downgrade.

Rollo's team at Morgan Stanley placed an even more dire worst-case scenario next to a price target of $0. This is because the team is already forecasting an EBITDA loss of $900 million this fiscal year, and further losses in 2023 would make CCL's debt levels unsustainable.

"Our FY23 EBITDA forecast drops 10% to $5.0bn as we factor in some occupancy pressure from continuing health protocols over the winter, as well as weaker pricing," Rollo wrote. "Our EPS forecasts come down more due to higher financing costs, with a 63% increase in FY22 losses, a 46% downgrade to FY23 EPS and a mid-teens downgrade thereafter. Our FY22/FY23/FY24 net debt forecasts increase by 5%/8%/10% due to higher than expected FY22 cash burn and interest costs."

With $4 billion coming due over the next year and a half, it is extremely important that demand stays strong for Carnival, said Rollo. Both Norwegian Cruise Line (NCLH) and Royal Caribbean (RCL) are trading 6% to 8% lower on Thursday in tandem with Carnival. The entire industry is smarting from higher financing costs, higher fuel costs and uncertainty over bookings.

Carnival Cruise Lines Stock Forecast: Will CCL hit $7?

Carnival Cruise Lines stock has not traded at $7 since 1992. This is not to say it cannot happen. It just shows how far you have to fall to trade where you were three decades ago. The real question, if you have read this far, is should you buy in to benefit from a massive turnaround. 

The pandemic low in March 2020, a time period we have to go back to so often these days, was $7.80 for CCL stock. Dropping another 80 cents is obviously not unlikely at this point. It would only amount to a further 18% drop.

Neither is it impossible to imagine Carnival turning things around. But to take a moral from the 1992 NFL football season, it would be like the Buffalo Bills finishing second place in their division only to come from behind (35-3) to win the Wildcard Game (the Miracle at Rich), the AFC East Division playoff, the AFC Championship and then Superbowl XXVII. In point of fact, they did the first of those three, but they lost the Superbowl 52-17.