One of the standouts of today's morning trading session was Carnival, which logged a 3.2% performance and outperformed the S&P 500 by 3.0%. The Marine Shipping stock is now trading at $16.53 per share and may still have upside potential because it is still -20.41% under its average target price of $20.77. Analysts have set target prices ranging from $13.0 to $25.0 dollars per share, and have given the stock an average rating of buy.
We can use Carnival's short interest as a proxy for determining general market sentiment regarding the stock. The short interest is the percentage of the share float that represents short positions, meaning that the investor believes the stock will decline in the future. Since CCL's short interest is 11.7%, the market sentiment is mixed on this stock.
Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.
Another way to gauge the sentiment on Carnival is to look at the percentage of institutions that are invested in the stock. In this case, 58.3% of the shares are held by pension, mutual, and hedge funds, which shows that these institutions probably have strong confidence in the stock.
If institutions are invested in a particular stock, it shows in most cases that they have performed quality research and concluded that it is a good investment. In some cases, however, increases in institutional ownership could be a sign of a takeover attempt or proxy fight, which can actually injure share prices. Also, institutions are not infallible, and can certainly make miscalculations -- often with spectacular results.
Overall, there is positive market sentiment on Carnival because its an analyst consensus of strong upside potential, a buy rating, an above average percentage of its shares sold short, and an average number of institutional investors. Warren Buffett famously said that in the short term, markets are voting mechanisms, but in the long term, they are weighing mechanisms. This means that long term investors should be aware of a stock's fundamentals before committing.
Buffett was one of the fist investors to focus on free cash flow as a yardstick for a company's health. Here are CCL's recent cash flows:
| Date Reported | Cash Flow from Operations ($ k) | Capital expenditures ($ k) | Free Cash Flow ($ k) | YoY Growth (%) |
|---|---|---|---|---|
| 2023 | 4,281,000 | 3,284,000 | 997,000 | 115.08 |
| 2022 | -1,670,000 | 4,940,000 | -6,610,000 | 14.33 |
| 2021 | -4,109,000 | 3,607,000 | -7,716,000 | 22.23 |
| 2020 | -6,301,000 | 3,620,000 | -9,921,000 | -21667.39 |
| 2019 | 5,475,000 | 5,429,000 | 46,000 | -97.44 |
| 2018 | 5,549,000 | 3,749,000 | 1,800,000 |
