The recent vaccine euphoria sent cruise operator Carnival (NYSE:CCL) stock surging to new highs — a double-layered one at that. After a steady downward trend for much of this year, the promise of a vaccine gave CCL stock a much-needed boost.
If Carnival is able to navigate the unchartered waters as we head to a new normal, there will be a lot of upside ahead. However, while a rebound is in the cards, it could several quarters before we see results. CCL stock is a good buy at its current price but be prepared for some layovers.
Double Vaccine News Sends CCL Stock Soaring
Recent reports from Pfizer (NYSE:PFE) and BioNTech (NASDAQ:BNTX) on efficacy of their vaccine candidate signaled new hope for a return to normal, pushing all major stocks to highs. This was a huge win for Carnival, whose ships have been docked for much of the year. CCL stock soared by 40% following the drug makers’ announcement, its biggest jump since going public in 1987.
While this is great news for the company, Carnival remains cautiously optimistic. “This is a very positive development for the world … It’s too early to determine the impact this may have on the conditional sail order in the U.S., if any,” the cruise operator wrote in an email to CNBC.
As investors and Covid-crushed companies rejoiced at the announcement, there was more good news just around the corner. In a surprising turn of events, Moderna (NASDAQ:MRNA) announced that its vaccine is 94.5% effective in its Phase 3 trials, topping Pfizer and BioNTech’s vaccine effectiveness. Once again, investors cheered the news, pushing CCL stock up by 9.7%. Carnival now has more reason to be hopeful for an earlier than anticipated recovery.
The development of a potential vaccine to combat the virus is excellent news for everyone. However, there are still a lot of questions that remain unanswered. For instance, Moderna’s vaccine has proved to be effective in trials but researchers are yet to determine the side effects and the impact on asymptomatic carriers. Adding to this, even if the vaccine does get approval from the FDA, it could take months before the entire population is inoculated.
This means that companies like Carnival that are stymied by the coronavirus pandemic are not out of the clear. It could take the company months, even years to reach its pre-pandemic levels. So if you are not in it for the long-haul, CCL stock may not be a good choice.
Making a Comeback
In addition to the arrival of Covid-vaccine, Carnival has plenty of other reasons to remain optimistic. At the onset of the pandemic, cruise ships came to standstill as the government issued a no-sailing order. Carnival burned through millions of dollars in cash each day as ships remain harbored at the port. The order was extended multiple times as cruise lines patiently awaited a breakthrough.
The end of October brought Carnival a glimmer of hope after months of uncertainty. The CDC announced that in the next phase, cruise ships can simulate voyages. While this does not mean operating at full capacity, ships can sail with crew if they adhere to precautionary measures. This will serve as a test before companies return to pre-pandemic guest numbers. Carnival stock popped 5% following the announcement.
The announcement in no way signals a return to a pre-pandemic life for Carnival but it is a step towards some semblance of recovery. On the flip side, Carnival will also need to invest millions of dollars to implement preventive measures, hurting its bottom line in the short-term. Investors should proceed with caution on this stock.
In other news, Carnival decided to cash in on its recent vaccine wins. After seeing a double spike in its share price over two weeks, CCL is making the best of a good time. The company announced that it will sell $1.5 billion in stock. This development comes after Moderna’s vaccine news on Monday which instilled confidence in Carnival’s imminent comeback. The money will be used for general corporate purposes according to the company.
Bottom Line On CCL Stock
Investors have good reason to remain optimistic about Carnival stock. A double vaccine rally and new CDC guidelines will spearhead the path to recovery. But it’s worth proceeding with caution if you do invest in the stock.
For one, there is still a high level of uncertainty on what a post-pandemic world will look like. Have cruise ships lost their allure for good or will people board ships when it’s safe again?
The recent rally is great for CCL stock but the news should be taken with a grain of salt.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.