Trading at $71.65 before the pandemic and down to $11.23 at the time of writing, Carnival Corporation (CCL) seems to be a company that cannot catch a break. The stock took several hits this week as investment companies took a bearish take on the stock.
While investors seem to be confident that the travel industry will be recovering in the coming months and years, the take on Carnival Corporation appears to be taking a more negative turn.
Pandemic Might Be Over, But Not For Carnival
The effects of the pandemic seem to be keeping the executives at Carnival busy, despite the height of COVID-19 on the cruise industry not impacting cruises as it did in the past. Over the last weeks, Carnival Corp. stocks have been taking several hits.
While investors such as the Susquehanna Financial Group have issued positive feedback on the forecast for Norwegian Cruise Line Holdings and Royal Caribbean Cruises, that same financial institution remains neutral on the estimates for Carnival Corporation.
That take seems to have come chiefly from the stressed balance sheet it has carried over from the previous two years and several environmental decisions that have gone against the company in the last years.
But, in a world where fuel prices are rising, interest rates are rising, and food and beverage prices are seeing huge inflation rates, the cruise industry has been under significant pressure.
With news of Carnival potentially selling Seabourn Cruise Line to bring some cash flow back into the company, it will be hard to convince investors to buy into the cruise company. While not yet at its lowest point yet, Carnival Corporation’s stock is coming awfully close.
Down 83% since January 2018
While CEO Arnold Donald has been receiving commendations for steering the world’s largest cruise company through the pandemic, it’s not hard to see why the board decided to give Josh Weinstein a chance.
Carnival’s stock is currently trading at the lowest point since it crashed in January 2020 and reached its lowest point of $8.49 on April 3, 2020. And this is where the real worry lies.
Carnival Corporation’s fleet of cruise ships, sailing for nine different brands, are nearly all sailing again. The company has invested heavily in renewing its fleet, increasing efficiencies, and focusing on environmental compliance. Yet it seems to be having little effect.
Selling Seabourn, although still unconfirmed, will bring some breathing space for Carnival Corporation. But it will not satisfy investors. If anything, it will make them even more pessimistic on what the future brings for the cruise giant.
Last week, Bloomberg warned about the rising cost of debt and questioned Carnival’s ability to meet its interest payments. That message made Carnival’s stock tumble 18.63% this week, 21.49% this month, and 83% since January 2018.
On Wednesday, Morgan Stanley issued another warning on Carnival’s debt load, citing weak sales, growing economic risks, and the rising cost of interest on the debt. All in all, the pandemic has turned Carnival Corporation into one that is likely to see some very difficult times ahead.