Stifel, Nicolaus & Co. is advising clients to pay close attention to pricing trends at Carnival Corp. to determine where the cruise ship company is headed.
THE OPINION: Carnival has been wrestling with a string of high-profile incidents in which ships have malfunctioned and in one case, left thousands of passengers stranded. The company has lowered prices for its cruises to win over customers, but that has led to lower-than-expected revenue.
Carnival recently lowered its full-year outlook based on this fallout from these issues.
Analyst Steven Wieczynski believes the company's second-quarter results, in and of themselves, will not move the stock price much when the company posts them next week.
Carnival investors, instead, should be focused on how fast the company is improving its bookings volume and where prices are headed for its cruises. Wieczynski said pricing will prove to be the key to its recovery. Investors may also be looking to see how Carnival's quarter may impact other companies in the sector, and also what executives say about conditions in Europe. More than half of European Union countries are now in recession.
The company's recovery after these high-profile incidents will require more time than the Wieczynski had originally anticipated, he said, but the current stock price may present an opportunity to buy.
He maintained a "Buy" rating on its shares and a target price of $40.
THE STOCK: Shares of Carnival fell 1 cent to close at $33.43 Friday. The company's stock, which has taken a bit of a roller coaster ride during the year, is trading near where they were at this time last year, despite broader market gains.