If there’s a market segment that’s emblematic of the damage caused by the novel coronavirus, it’s cruise lines. The world’s biggest cruise operator, Carnival (NYSE:CCL), has struggled to recover during this challenging time. Some CCL stock holders, meanwhile, are still waiting to get back to break-even.
As if Carnival’s problems weren’t bad enough, in July the Centers for Disease Control and Prevention (CDC) extended the no-sail order it had already imposed on U.S. cruise lines. With this, Carnival’s U.S. cruise ships will remain docked through Sept. 30.
With the extension of the no-sail mandate, the outlook seemed bleak for CCL shareholders. It also didn’t help that there were, in fact, numerous people falling ill on cruise ships. According to CDC data from March 1 through July 10, there were “2,973 Covid-19 or Covid-like illness cases on cruise ships, in addition to 34 deaths.”
Now we’re in August and CCL shareholders are still waiting for a stock-price rebound. Does this mean that it’s time to just give up and sell your shares? Not necessarily. There is hope on the horizon as Carnival’s U.S. cruise ships might set sail sooner than you think.
A Closer Look at CCL Stock
Back in January of this year, CCL stock was riding high and few people expected the share price to collapse. Indeed, the stock price had touched a short-term peak of $51.94.
As of mid-August, that price is still the 52-week high for CCL stock. Having traded between $13 and $20 for a while, at least the bulls can say that CCL is above the 52-week low of $7.80.
Granted, CCL stock is a speculative investment. It’s impossible to know with certainty the future course of Covid-19. As a result, CCL shareholders should expect volatility throughout the remainder of the year at least.
That being said, it’s a rare opportunity to own CCL stock at a price point not seen in more than a decade. There’s plenty of upside potential as CCL has traded above $70 in the past.
To get there the main catalyst would likely be the discovery of a successful Covid-19 vaccine. In the meantime, though, there may be hope that some of Carnival’s docked cruise ships will be ready to sail again soon.
Boarding the Ship
By now, the pent-up demand among U.S. cruise fanatics is undoubtedly reaching a tipping point. Entertainment and travel seekers won’t just stay home forever. Yet, the CDC’s restrictions are still in effect.
Rather than sulk in the present, though, CCL shareholders should look toward a brighter future. Carnival is already positioning itself for better times ahead as the company is preparing bookings for 2021 and 2022.
Specifically, Carnival’s Holland America Line division recently announced that it’s opening bookings for two upcoming Fort Lauderdale, Florida-based cruises. And as you’ll see, these cruises aren’t quick trips.
The first one will be the 2021 Grand Africa Voyage, a 71-day cruise that offers safari-like experiences. Then there will be the much more extensive 2022 Grand World Voyage. That 128-day cruise experience will include visits to 50 ports located in 27 different countries.
Clearly, Carnival wouldn’t open up these cruise bookings unless the company believed that Americans were ready, willing and able to travel again. It doesn’t require a huge leap of faith to predict that conditions will be more favorable for Carnival in 2021 and 2022.
On top of all that, Carnival is preparing to resume its cruise-ship activity in Germany and Italy in early September. Shareholders should bear in mind that Carnival is an international company and the European Union is an important market.
The Bottom Line
It’s somewhat of a speculative bet to maintain a position in CCL stock. Yet, there’s a favorable reward-to-risk profile here as Carnival’s ambitious plans for its U.S. cruises suggest a brighter outlook for this struggling company.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. As of this writing, David Moadel did not hold a position in any of the aforementioned securities.