Throughout the second quarter of 2020, it was hard to imagine Carnival (NYSE:CCL) returning to profitability. The onset of the novel coronavirus kept many cruise ships grounded, and some CCL stock holders lost faith in their investment.
There’s still an element of uncertainty surrounding CCL stock because no one can predict when a coronavirus vaccine will be available to the public. Until that happens, it’s unlikely that cruise line attendance will return to pre-pandemic levels.
However, this doesn’t mean that Carnival stock holders won’t post any gains until a vaccine is discovered. People can still book cruises for next year. Indeed, there may be a loyal contingent of cruise fanatics who will gladly board a Carnival ship as soon as it’s available.
A Closer Look at Carnival Stock
The ultimate goal for long-term Carnival stock holders should be to get back to the 52-week high of $51.94. In all likelihood, this is not something that will happen until a coronavirus vaccine is available.
And unfortunately, there’s currently no dividend to collect while you’re waiting for Carnival stock to stage a comeback. Yet, there is a more realistic short-term objective. In early June, CCL achieved a short-term peak of around $25.
That’s not an unreasonable goal for the remainder of 2020. However, if you have a long-term time frame for Carnival stock, you won’t need to take profits at $25. From that price, if CCL attains its pre-pandemic level, you could literally double your money if you just hold on and be patient.
Safety First
During the peak of the coronavirus crisis, there were news stories about people being stuck on cruise ships for extended periods of time. Unsettling reports of people getting sick on cruises were in the headlines.
Suffice it to say that this was not a good time for the cruise line industry. It certainly didn’t help Carnival stock holders when the Centers for Disease Control and Prevention (CDC) extended its no-sail order through Sept. 30.
Carnival should be given credit for putting safety first and self-imposing an extended ban on cruises. As Royal Caribbean Chief Executive Richard Fain explains, “since the crisis began, we extended our suspension of operations seven times, now through Oct. 31 for most voyages.”
What’s good about the cruise ships being docked for so long is that it allows time for the worst cruise memories to fade. Given enough time, the disturbing images of passengers getting sick on cruise ships will be a distant memory.
Forgiving and Forgetting
William Lang, the chief medical officer of WorldClinic and the former director of the White House Medical Unit, once stated, “What has been demonstrated time and time again, from various outbreaks and epidemics, is that people have a short memory.”
That’s a great summary of the bull case for Carnival stock. Many people have an inherent need to be social and to travel. Cruises will provide a means of escape for folks who have been cooped up during the pandemic.
And indeed, loyal cruise aficionados are already preparing to set sail next year as Carnival “continues to see demand for new bookings for 2021.” Moreover, two cruise line brands from Carnival’s Costa Cruises, which are based in Italy, were set to sail on Sept. 6.
Plus, two of Carnival’s AIDA Cruises, based in Germany, will start sailing on Nov. 1. Then, two additional AIDA cruise ships will set sail in December of this year.
The Bottom Line
Carnival stock investors shouldn’t expect people to erase the memories of Covid-19 completely. However, many cruise fans may be willing to forgive Carnival.
With people already booking cruises for next year, there’s evidence that the ship will sail again for CCL stock.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
