The last time I weighed in on Carnival (NYSE:CCL), I said, “If Carnival can keep its head above water in these rough times, I strongly believe it can make a return to $40.” That was on May 11, as the CCL stock traded at a low of $13.64.
Not long after, the CCL stock would hit a high of $25.27, which was a great return in just weeks. Unfortunately, the stock would plunge from that point thanks to the coronavirus. While I’d love to tell you that the stock can run higher at the moment, I can’t.
With coronavirus cases surging, Carnival stock could easily slip back to April 2020 lows.
A Closer Look at CCL Stock
The coronavirus isn’t under control whatsoever. And there’s no telling if it will be.
The world is now up to 12.1 million cases with 551,384 deaths. The U.S. just now passed 3.08 million cases. Brazil is up to 1.7 million cases. India is up to 767,296. Russia is up to 706,240.
World Health Organization Director-General Dr. Tedros Adhanom Ghebreyesus just said, “In most of the word the virus is not under control.”
And Michael Osterholm, head of the Center for Infectious Disease Research and Policy at the University of Minnesota just said:
“We have to shut down again and bring the U.S. back up slowly, in a measured way. We need to understand as a nation that we’re just in the very earliest stages of this pandemic yet…[The virus] will not rest until it gets to 50% to 70% of the population infected, and only then it will slow down — it will not stop transmission.”
That’s not exactly the news we wanted to hear at this point. We wanted to hear virus cases were dropping, and that all is well. Unfortunately, that’s not the case at all.
Carnival May Not Be Allowed to Sail Soon
Granted, cruise bookings have gone through the roof in recent months.
In fact, as noted by Fast Company contributor Michael Grothaus, “Carnival bookings shot up 600%” for August 2020 cruises. All after the company said some ships would cruise again around August 1. But even the company said that was a mistake.
Then, there were hopes Carnival would resume by September. But that not even happen with CEO Arnold Donald saying, “I don’t know when we’ll sail again.” Also, it won’t be up to Carnival when it can hit the water again.
That’ll be up to the U.S. Centers for Disease Control and the ship’s travel destinations. “The world is going to tell us,” added Donald. “Destinations are going to open when they decide to open. It’s not going to be us telling them!”
Carnival Could be Sunk if Cruises Can’t Resume
Carnival says it is confident it can avoid bankruptcy. And, according to Donald, the company can survive the year without cruise revenue. However, if cruise restrictions aren’t lifted this year, or even early next year, the company could face a sizable issue and sink.
In fact, according to Motley Fool contributor Will Ebiefung, “Carnival reported $7.6 billion in available liquidity on its balance sheet. This sum won’t last very long at current rates of cash burn because the company expects a net loss of $4.4 billion in the second quarter. It will probably report a similar loss in the third quarter as operations are paused through Sept. 30.”
The Bottom Line on CCL Stock
Unfortunately, the virus isn’t going away – at least not any time soon.
If it shuts down the economy again and prevents Carnival from cruising this year, the CCL stock could run into a major problem. The last thing I would want to see is a CCL bankruptcy filing, but there may be no way around it with the virus.
Until there’s clarity on the virus, avoid the CCL stock for now. Hopefully, you were on board CCL when it did run from $13.64 to $25.27.
Ian Cooper, an InvestorPlace.com contributor, has been analyzing stocks and options for web-based advisories since 1999. As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.
