At the start of this crisis, cruises became floating coronavirus “super spreaders.” If there was ever a crisis tailor-made to hurt the sector, it was this one. CCL Stock and the Cruise SectorĬovid-19 hit the cruise industry like a ton of bricks. Regardless, the writing is on the wall for Carnival there are still several months before CCL stock will become a viable investment again. They provide excellent insight on how best to chart and invest in this name. I recommend reading the articles by Will Ashworth and Chris Tyler on CCL stock. Many InvestorPlace columnists feel the same way. Against this backdrop, along with Carnival’s huge debt load, it’s difficult to recommend buying CCL stock. In the last five quarters, the international cruise operator’s results have come in below analysts’ average estimates four times. Meanwhile, Carnival, in particular, has been struggling for awhile. These kinds of requirements are why industry insiders are not pleased with the CDC. The valuation and the near-term fundamentals are just too risky at Carnival right now.For instance, on cruises, sunbathers will have to wear masks even when lounging outdoors in bathing suits by pools. Cruising will face the longest road back within the universe of travel and tourism stocks, even if the companies are already worth more than before their businesses came to a screeching halt. The quarterly dividend that it suspended more than a year ago isn't coming back in the next couple of years. It has a smaller fleet after unloading some of its productive ships. This isn't going to be the same Carnival as before. Carnival was trading at a lower valuation before the pandemic when business was coasting along just fine. All of the money that it has raised and subsequently spent to stay afloat has padded its enterprise value to more than $53 billion as of Monday's close.
The bad news here - and why Carnival is ultimately not a buy now - is that the valuation is out of whack.
Carnival may not have the flashiest margins in the industry, but it's going to be a survivor. It's probably also no surprise to find that the $23.6 billion in financing that Carnival has raised since March of last year is also more than the new liquidity of its two nearest competitors combined.Ĭarnival's namesake line is also popular with first-time passengers given its market positioning as an economical brand. It's larger than its two closest rivals combined, and there's scalability here in everything from marketing to purchases. There are some good things to say about Carnival. New bookings are basically being wiped out by refund requests on canceled cruises from folks not opting for enhanced future cruise credit. The problem here is that it also was at $2.2 billion in deposits three months earlier.
CARNIVAL CRUISE LINE STOCK UPDATE
Carnival's going to be spending more money than it's making for some time even after it gets back to business.Īnother problematic nugget out of last week's financial update is that Carnival had just $2.2 billion in deposits for bookings at the end of February, and most of that is in the form of future cruise credit from folks on canceled voyages. This is another way of saying that it's going to be going through $600 million a month for the next couple of months.Ī resumption of sailing doesn't mean that the cash burn flame will flicker out.
That burned to a monthly bonfire of just $500 million through the first three months of the year, but Carnival points out that it expects to average $550 million a month for the first half of the year. It was initially projecting a monthly cash burn rate of $530 million last year. Carnival's newfound cash is going into the incinerator.
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