We have noted Carnival's positive performance during today's afternoon trading session, during which it logged a 2.0% outperformance of the S&P 500. At its current price of $25.89, the company is now trading in range of its average target price of $26.53, which calls into question its ability to keep moving higher. Analysts have given the Marine Shipping stock target prices ranging from $14.0 to $32.0 dollars per share, with an average rating of buy.
For the greater market's outlook on the stock, we can use Carnival's short interest as a proxy. The short interest represents the proportion of the float's shares that are tied to short positions, meaning that the investor believes the stock will decline in the future. Here, the stock's short interest is 6.8% which means the outlook is split.
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.
One way to get an idea of the market sentiment on a stock is to check its rate of institutional ownership. In the case of Carnival, institutional investors own 62.2% of the shares. This would indicate a positive sentiment towards the stock among institutions. What does this really tell us?
Institutional investors such as hedge funds, investment firms, and wealth managers devote significant resources to identifying good investments. If they have decided to invest in CCL, it probably means they believe it is a solid investment choice. But it could also mean they are buying up shares in an effort to acquire the company or get seats on the board of directors. Also bear in mind that institutions are fallible (just maybe not quite as fallible as the average retail investor), so they may simply be wrong when they think they've found a good stock.
Overall, there is positive market sentiment on Carnival because its an analyst consensus of some upside potential, a buy rating, an average amount of 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 |
