Without question, the coronavirus has devastated cruise stocks, including Carnival (NYSE:CCL). In fact, since 2020 began, Carnival stock has plunged from a high of $51.34 to Friday’s recent low of $14.56. The shares ultimately closed at $15.16 on Friday.
Carnival’s competitors, including Royal Caribbean (NYSE:RCL) and Norwegian Cruise Line (NYSE:NCLH), haven’t fared much better. The sector has struggled due to a pandemic that’s prevented any cruising.
Cruise ships could resume sailing in November if the White House gives its approval.
But if ships start cruising and cause many new coronavirus cases, the industry could be quickly shut down again. In my opinion, with the virus still rapidly circulating, investors should avoid Carnival stock at the moment.
In the near-term, as I said in my July 13 column,, I think the shares could test their April 2020 lows.
The White House Pushes to Resume Sailing in November
The U.S. Centers for Disease Control and Prevention (CDC) initially sought to prevent cruise ships from sailing until Feb. 15, 2021. However, the White House has overruled CDC Director Robert Redfield on the issue, so cruises may hit the water again starting next month.
The White House’s move came after the cruise industry requested that the CDC’s order be lifted.
It doesn’t appear that the CDC would be pleased with a resumption of cruises next month.
“Cruise ship travel markedly increases the risk and impact of the COVID-19 disease epidemic within the United States,” the agency said, according to The Points Guy. “If unrestricted cruise ship passenger operations were permitted to resume, infected and exposed persons disembarking cruise ships would place federal partners (e.g. Customs and Border Protection and the U.S. Coast Guard), healthcare workers, port personnel and communities at substantial unnecessary risk.”
The Coronavirus Crisis Could Get Far Worse
At the moment, 34 million coronavirus cases have been reported globally , with over 1 million deaths. In the U.S., there have been 7.2 million cases.
While there are hopes that a vaccine will be distributed soon, no one is quite sure when it’ll be ready. Until then, the virus is only expected to worsen.
“We look like we’re going to have a very deadly December ahead of us in terms of the toll of coronavirus,” Director of the Institute for Health Metrics and Evaluation Dr. Christopher Murray said, as quoted by CNET. “The number of US deaths could double over the next four months, according to an IHME computer model.”
If that’s the case, it makes no sense to put hundreds of people from different countries on cruises and hope for the best. If cruise companies report hundreds of coronavirus cases at sea, the industry will sink.
The Bottom Line on Carnival Stock
Unfortunately, the virus isn’t going away anytime soon.
If cruises hit the sea again in November and there are hundreds of coronavirus cases on cruise ships , the industry could come under significant pressure. I’m being pessimistic, but I’m also being realistic. The virus is getting worse, and no vaccine has been distributed yet.
Packing a boat full of people makes no sense at this point. Until a vaccine is introduced, I wouldn’t sail on a cruise ship or touch Carnival stock.
As I mentioned earlier, in the near-term I still believe the shares could test their April 2020 lows. The best time to buy Carnival’s shares and those of its competitors will be when a vaccine is approved. Once that happens, we’ll start seeing a bigger recovery by travel stocks in general and cruise stocks in particular.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999.