Carnival stock (NYSE: CCL), the largest cruise line operator in the U.S., has fared quite well recently, rising by almost 22% over the last month, compared to the broader S&P 500 which has gained just 1% over the same period. The rally has come despite the recent surge in U.S. Covid-19 cases amid the spread of the highly infectious omicron virus variant. Cruise ships have seen a 30-fold increase in Covid-19 infections over two weeks, and The Centers for Disease Control and Prevention has warned against cruise ship travel, regardless of vaccination status.
However, investors are apparently looking beyond the current virus surge, as Carnival appears quite upbeat about its prospects for 2022 and beyond, driven by pent-up demand for cruises. The company intends to have its entire fleet sailing by this spring, potentially enabling it to cash in on the summer sailing season, which generates the bulk of the profits in the cruising industry. Carnival expects to turn profitable over the second half of 2022 and we already saw some signs of this as the company said that it posted positive operating cash flows during November 2021. Carnival’s stock is also trading at about 50% below pre-Covid levels seen in February 2020. Investors might be seeing some value here, given that Carnival is likely to see revenue rise to about 70% of 2019 levels by this year and to almost 95% of 2019 levels by 2023, per consensus estimates.
That being said, there are real risks as well. The uncertain trajectory of the Covid-19 pandemic and the emergence of new virus variants could prove a lingering risk to the cruising industry. Carnival’s high leverage also remains a concern. The company’s total debt stood at a large $33 billion as of the end of Q4 2021, and it could take a long time before it reduces leverage and possibly drives returns for shareholders via dividends and buybacks. Our analysis on strong data-ga-track="ExternalLink:https://dashboards.trefis.com/data/companies/CCL/no-login-required/9fByDoBp/Carnival-During-2008-Recession-vs-Now-CCL-Stock-Has-98-Upside-If-It-Recovers-To-Pre-Covid-Levels-?fromforbesandarticle=trefis220114"">>Carnival Upside Post Covid
compares Carnival stock’s performance over the 2008 financial crisis versus the Covid-19 crisis. For details about CCL revenues and comparison to peers, see
strong data-ga-track="ExternalLink:https://dashboards.trefis.com/data/companies/CCL/no-login-required/0Jkg7GwI/Carnival-CCL-Revenue-Comparison?fromforbesandarticle=trefis220114"">>Carnival Revenue Comparison
Below you’ll find our previous coverage of Carnival stock where you can track our view over time.
[11/29/2021] What Lies Ahead For Carnival Stock As Concerning New Covid Strain Emerges
Cruiseline stocks saw a big sell-off on Friday, as the World Health Organization designated a new strain of the novel coronavirus that was first identified in southern Africa as “a variant of concern.” Carnival stock (NYSE: CCL), the largest cruise line operator in the U.S., dropped almost 11% in Friday’s trading. Although it’s still early to tell if the strain is likely to cause another surge in Covid cases worldwide, hurting the cruising industry which is only slowly getting back to normal after remaining shut for over a year, investors in the cruise line space will need to be cautious. The new virus variant, dubbed Omicron, has many more mutations and is apparently more transmissible, and is also believed to pose a higher risk of reinfection versus the Delta variant of the virus, which is currently the dominant strain worldwide. It’s also not yet clear whether the current crop of Covid-19 vaccines will be as effective against the variant.
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Now, Carnival has been looking forward to a solid 2022, recently noting that bookings for the second half of the next year was ahead of pre-pandemic levels, while guiding that it was likely to be cash-flow positive and profitable in 2022. However, if the new variant drives another Covid wave or shows signs of evading vaccines, it clearly won’t be smooth sailing for Carnival and the broader cruising industry. Moreover, Carnival also has much more leverage on its books versus when the first wave of Covid-19 hit in March 2020, meaning that the financial risks could be more notable this time around. For perspective, Carnival’s long-term debt stood at $28 billion as of the end of Q3 2021, up from $9.7 billion at the end of 2019.
So, is CCL stock set to decline further in the near term or will it rise? We believe that there is a 53% chance of a rise in Carnival stock over the next month (21 trading days) based on our machine learning analysis of trends in the stock price over the last ten years. See our analysis on strong data-ga-track="ExternalLink:https://dashboards.trefis.com/data/companies/CCL/no-login-required/knZFY2qt/Carnival-CCL-stock-chance-of-rise-in-the-next-one-month?fromforbesandarticle=trefis220114"">>Carnival Stock Chance of Rise for more details.
[11/16/2021] What’s New With Carnival Stock?
Carnival stock (NYSE: CCL), the largest cruise line operator in the U.S., has seen its stock decline by almost 9% over the past week (five trading days), compared to the broader S&P 500, which remained roughly flat over the same period. Now there hasn’t been too much news specific to Carnival over the past few days. However, investors were seemingly disposed to booking some profit in the stock after it saw a bit of a rally in recent weeks following its better than expected outlook provided toward the end of October, indicating that it expects to be cash-flow positive and profitable in 2022. Moreover, positive news on the anti-viral treatment for Covid-19 from Pfizer also appears to have helped cruising stocks. That said, investors are also probably concerned about the company’s high debt load, which could limit returns for shareholders in the longer term. For perspective, Carnival’s long-term debt stood at $28 billion as of the end of the third quarter, up from $9.7 billion at the end of 2019.
Now, is CCL stock set to decline further or will it rise? We believe that there is a decent 68% chance of a rise in Carnival stock over the next month (21 trading days) based on our machine learning analysis of trends in the stock price over the last ten years. See our analysis on strong data-ga-track="ExternalLink:https://dashboards.trefis.com/data/companies/CCL/no-login-required/SegCjGd1/Carnival-CCL-stock-chance-of-rise-in-the-next-one-month?fromforbesandarticle=trefis220114"">>Carnival Stock Chance of Rise for more details.
Five Days: CCL -9%, vs. S&P 500 -0.3%; Underperformed market
(4% event probability)
- Carnival stock
declined 9% over a five-day trading period ending 11/15/2021, compared to the broader market (S&P500) which remained roughly flat over the same period.
- A change of -9% or more over five trading days has a 4% event probability, which has occurred 104 times out of 2516 in the last ten years.
Ten Days: CCL -3.3%, vs. S&P 500 1.6%; Underperformed market
(26% event probability)
- Carnival stock
declined 3.3% over the last ten trading days (two weeks), compared to the broader market (S&P500) which rose by 1.6%.
- A change of -3.3% or more over ten trading days has a 26% event probability, which has occurred 642 times out of 2516 in the last ten years.
Twenty-One Days: CCL -5.8%, vs. S&P 500 4.8%; Underperformed market
(18% event probability)
- Carnival stock declined 5.8% over the last twenty-one trading days (about one month), compared to the broader market (S&P500) which rose by 4.8%
- A change of -5.8% or more over twenty-one trading days has an 18% event probability, which has occurred 455 times out of 2516 in the last ten years.
While CCL stock has seen lower levels during the current Covid-19 crisis, how did it fare in the 2008 crisis? Our analysis on strong data-ga-track="ExternalLink:https://dashboards.trefis.com/data/companies/CCL/no-login-required/9fByDoBp/Carnival-During-2008-Recession-vs-Now-CCL-Stock-Up-3-YTD-Has-98-Upside-If-It-Recovers-To-Pre-Covid-Levels-During-The-2008-Recession-It-Lost-46-And-Then-Gained-62-?fromforbesandarticle=trefis220114"">>CCL 2008 vs Now compares CCL’s performance over the 2008 financial crisis versus the Covid-19 crisis.
[10/26/2021] Up Over 80% From Covid Lows, Is Carnival Stock A Buy?
Carnival stock (NYSE: CCL), the largest cruise line operator in the U.S., has seen its stock decline by almost 16% over the past month (about 21 trading days), compared to the broader S&P 500, which gained about 3% over the same period. The recent decline comes due to a wider than expected Q3 loss, a revised price target on the stock by a brokerage firm, and some weakness in the broader travel space amid headwinds to the Chinese economy. That said, things are slowing, but surely looking up for the leisure cruising industry, which bore the brunt of the Covid-19 pandemic. Carnival resumed sailing from U.S. ports in July and is likely to have about 50% of its fleet in revenue operations by the end of this month. Demand is also likely to look up, with Covid-19 infections in the U.S. trending steadily lower, after seeing a big surge through the summer. Carnival has also indicated that bookings for the second half of 2022 were ahead of pre-pandemic levels.
So is Carnival stock a buy at current levels? While Carnival stock has gained about 83% from its March 2020 lows, it has underperformed the S&P 500, which has roughly doubled over the same period. Moreover, at the current market price of about $22 per share, the stock still trades at about 50% below its pre-Covid highs of about $44 per share. That said, investors need to account for higher levels of risk versus pre-Covid, given the company’s total debt has increased from roughly $9 billion in 2017 to close to $31 billion currently. The company is also seeing higher interest costs and this could weigh on profitability in the future. Moreover, with a 100% containment of Covid-19 looking unlikely and new mutations of the virus remaining a threat, there could be some revenue risk for cruise line operators, including Carnival, in the medium term.
While CCL stock has seen lower levels during the current Covid-19 crisis, how did it fare in the 2008 crisis? Our analysis on strong data-ga-track="ExternalLink:https://dashboards.trefis.com/data/companies/CCL/no-login-required/9fByDoBp/Carnival-During-2008-Recession-vs-Now-CCL-Stock-Up-2-YTD-Has-100-Upside-If-It-Recovers-To-Pre-Covid-Levels-During-The-2008-Recession-It-Lost-46-And-Then-Gained-62-?fromforbesandarticle=trefis220114"">>CCL 2008 vs Now compares CCL’s performance over the 2008 financial crisis versus the Covid-19 crisis.
[8/23/2021] Is Carnival Stock A Buy At $22?
We believe that Carnival stock (NYSE: CCL), the largest U.S. cruise operator, looks like a reasonably good buying opportunity at current levels. CCL stock trades near $22 presently and it is, in fact, down 55% from its pre-Covid levels of around $51 per share at the end of December 2020 – before the coronavirus pandemic hit the world. The stock recovered considerably over the first few months of this year, as growing vaccination rates and the company’s plans to resume sailing caused investors to get more optimistic about Carnival’s prospects. However, the stock declined by almost 30% since early June as the spread of the highly infectious delta variant of the coronavirus and the recent surge in U.S. infections have hurt the near-term outlook for the cruising industry. But now that the stock has corrected meaningfully to accommodate the slower than expected near-term recovery, we believe that CCL stock looks quite attractive at the current levels of around $22 per share.
While CCL stock has seen lower levels during the current Covid-19 crisis, how did it fare in the 2008 crisis? In this note, we focus on a comparative analysis of strong data-ga-track="ExternalLink:https://dashboards.trefis.com/data/companies/CCL/no-login-required/9fByDoBp/Carnival-Upside-Post-Covid-CCL-Stock-Up-1-YTD-Has-101-Upside-If-It-Recovers-To-Pre-Covid-Levels-During-The-2008-Recession-It-Lost-46-And-Then-Gained-62-?fromforbesandarticle=trefis220114"">>CCL stock performance during the current financial crisis with that during the 2008 recession in our interactive dashboard.
Timeline of Coronovirus Crisis So Far:
- 12/12/2019: Coronavirus cases first reported in China
- 1/31/2020: WHO declares a global health emergency.
- 2/19/2020: Signs of effective containment in China and hopes of monetary easing by major central banks helps the S&P 500 reach a record high.
- 3/23/2020: S&P 500
drops 34% from the peak level seen on Feb 19, 2020, as COVID-19 cases accelerate outside China. Doesn’t help that oil prices crash in mid-March amid Saudi-led price war
- Since 3/24/2020: S&P 500
recovers 97% from the lows seen on Mar 23, 2020, as the Fed’s multi-billion dollar stimulus package suppresses near-term survival anxiety and infuses liquidity into the system.
- 8/19/2021: Around 60% of the U.S. population has received at least one dose of the Covid-19 vaccine, while 51% of the population is fully vaccinated.
In contrast, here is how CCL stock and the broader market fared during the 2007-08 crisis
Timeline of 2007-08 Crisis
- 10/1/2007: Approximate pre-crisis peak in S&P 500 index
- 9/1/2008 – 10/1/2008: Accelerated market decline corresponding to Lehman bankruptcy filing (9/15/08)
- 3/1/2009: Approximate bottoming out of S&P 500 index
- 12/31/2009: Initial recovery to levels before accelerated decline (around 9/1/2008)
Carnival vs S&P 500 Performance Over 2007-08 Financial Crisis
CCL stock declined from levels of around $49 in October 2007 (the pre-crisis peak) to roughly $20 in March 2009 (as the markets bottomed out), implying that the stock lost as much as 60% of its value from its approximate pre-crisis peak. This marked a higher drop than the broader S&P, which fell by about 51%. However, CCL recovered strongly post the 2008 crisis to about $32 by the end of 2009 rising by 62% between March 2009 and January 2010. In comparison, the S&P bounced back by about 48% over the same period.
CCL Fundamentals In Recent Years Looked Good, But Present Situation Is Challenging
Carnival’s revenues rose from about $17.5 billion in FY’17 (fiscal years end November) to about $21 billion in FY’19, as demand for cruises increased. The company’s earnings also grew over the period, rising from around $3.70 per share to about $4.30 per share. However, the picture changed dramatically over FY’20, as revenues dropped to under $6 billion, with the company losing about $13 per share over the year. Although the company resumed sailing from U.S. ports in July, revenues are still expected to decline further in FY’21 to about $3 billion, per consensus estimates, as the spread of the more infectious delta variant of the virus likely causes some customers to hold back on cruising due to the recent resurgence of U.S. Covid cases.
Does CCL Have A Sufficient Cash Cushion To Meet Its Obligations Through The Coronavirus Crisis?
Carnival’s total debt has increased from roughly $9 billion in FY’17 to about $30 billion as of the last quarter, while its total cash increased from about $500 million to over $9 billion over the same period, as the company has raised funding to tide over the crisis. Although the company’s cash flows from operations grew marginally from $5.3 billion in FY’17 to $5.5 billion in 2019, the company burned over $6 billion in 2020 as operations were suspended through much of the year. Monthly cash burn over the first half of 2021 also stood at about $500 million. Considering this, we think that Carnival’s cash cushion appears to be sufficient to keep the company going over the next several quarters, even if demand remains muted in the interim. However, the company’s higher interest costs could weigh on profitability through the post-Covid recovery period.
Phases of Covid-19 crisis:
- Early- to mid-March 2020:
Fear of the coronavirus outbreak spreading rapidly translates into
reality, with the number of cases accelerating globally.
- Late-March 2020 onward: Social distancing measures + lockdowns
- April 2020:
Fed stimulus suppresses near-term survival anxiety
- May-June 2020:
Recovery of demand, with the gradual lifting of lockdowns – no panic anymore despite a steady increase in the number of cases
- Since late 2020: Weak quarterly results, but continued
improvement in demand and progress with vaccine development buoy market sentiment. Multiple countries have undertaken large-scale vaccine programs for Covid-19, though new variants of coronavirus resulted in an uptick inactive cases.
Overall, we believe that CCL stock is likely to see higher levels going forward. Although FY’21 is also likely to remain a relatively muted year for the company, FY’22 is likely to be better. Although Covid-19 could linger, cruise line companies (and their passengers) will likely adapt to the new normal potentially requiring vaccines for passengers and staff, submissions of a negative coronavirus test, and mask-wearing in indoor spaces. Carnival, along with its major rivals Royal Caribbean and Norwegian Cruise Line, have signaled robust demand for 2022, even factoring in higher prices for cruises. Consensus estimates point to sales of about $18 billion for 2022, almost approaching pre-Covid levels. With CCL stock remaining down by about 55% since late 2019, and demand slated to pick up, the risk to reward prospects for the stock are looking better, in our view.
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Source : https://www.forbes.com/sites/greatspeculations/2022/01/14/carnival-stock-is-trending-higher-despite-covid-surge-should-you-buy/3640