About a month ago, it seemed the world was coming to an end. At that time, I wrote an article that suggested Carnival Cruise Lines (NYSE:CCL) might be an interesting turnaround story when all was said and done. And if you just look at the price, CCL stock is up about 20% from its $10 price at the time of that article.
Of course, writing about cruise line stocks at this moment is akin to sticking your finger in the air to test the wind … in a hurricane.
Just when it looked like things might not be able to become worse for Carnival, the Centers of Disease Control and Prevention (CDC) extended the No Sail Order for all cruise lines for three months. Accordingly, Carnival announced that it had cancelled all cruise itineraries through June 26, 2020.
Cruise Lines Are in the Same Boat
Unfortunately for Carnival, a phrase like “a petri dish on water” tends to stick. And that’s the description that you hear ascribed to cruise ships right now. The novel coronavirus is giving never cruisers an opportunity to take a victory lap.
But if there’s a glimmer of hope in this marketing nightmare, it’s that misery loves company. Carnival is not being singled out. Right now, all cruise lines face the same threat.
This reinforces a point I made in my earlier article about Carnival. How the company handles this crisis may have an impact on if and how much demand returns when the CDC gives cruise ships the green light. And no cruise line is going to jump the gun on putting customers on board its ships.
Recent Surveys Suggest Carnival Has a Strong Future
One of the reasons that CCL stock was so volatile was because the company is incorporated outside of the United States. However, Matt McCall wrote that Carnival has overcome that obstacle and secured funding.
That allows investors the freedom to focus on the future of Carnival stock. In a recent article, InvestorPlace contributor William White referenced some recent tweets that suggest that at least some previous customers are ready to set sail.
- “When you start sailing again, I start sailing again… Be good to your excellent employees though… they are what makes you awesome.”
- “Can’t wait for this to be over. We have a trip planned for December but we want to go on another one before then. Saving my Covid check for another cruise.”
And if recent surveys are any indication, there may be real, pent-up demand. In a report to the Los Angeles Times, the travel site CruiseCompete.com said they were seeing a 40% increase in 2021 cruise bookings compared to 2019.
The Times also reported that, according to Swiss bank UBS, cruise bookings are up 9% in the past month on a year-over-year basis. And a significant number of those customers were booking new cruises, not just rescheduling a previously booked cruise. 76% of customers who had their cruise canceled in 2020 accepted credit towards a future cruise rather than taking a refund.
Has CCL Stock Found a Bottom?
For traders who have had the stomach to trade CCL stock over the last month has provided opportunities to profit. In the five trading days from March 18 through March 25, the stock climbed over 90%. But the next week, it went down about 55%. Since then the stock is back up about 60%.
The problem of the moment on the technical side is that the stock may not be showing lower lows, but it is showing lower highs. And in early March, the stock chart displayed the bearish death cross pattern.
Carnival didn’t create the problems that it faces. But that also means they have less control of the eventual outcome. For that reason, I would put Carnival on your watch list. However, it’s not a buy until there is a clear picture of how extensive the demand will be. Given the current trading patterns, the stock isn’t going anywhere fast.
As of this writing Chris Markoch did not hold a position in any of the aforementioned securities.