Are You Prepared to Take a Long Voyage With Carnival Cruise Lines?

Advertisement

In early May, I was concerned about Carnival (NYSE:CCL) stock moving too high too fast. Shortly after my article, the stock proceeded to climb 20%, but has since fallen back. Only this time, the selloff feels overdone. After all, the company is preparing to launch its initial post-pandemic cruises.

CCL stock cruise stocks docked cruise ships
Source: Kokoulina / Shutterstock.com

 

As someone who likes history, I find it interesting that stock charts have a way of telling a story. In October 2020 I was pointing out that the last time CCL stock had a dip anything like its loss at the onset of the pandemic was in 2008 at the onset of the financial crisis.  

It took nearly two years for the stock price to climb back to that level. And at that time, investors weren’t facing the public health concerns that stem from a global pandemic.  

Still, in October, I was theorizing that Carnival might be able to make half of its 2019 revenue in 2021. That looks like a pipe dream. Not impossible but a lot of things will have to break right.

 

The Cost of Being Wrong  

I enjoyed reading InvestorPlace technician Tyler Craig’s recent perspective on CCL stock. One observation he made was in 2020, a share price of $24 was a ceiling. But with all the ships in port, there was a fear that the floor was lava.

In fairness, I don’t think that most investors believed there was any real concern about Carnival going bankrupt. However, as the popular movie line goes, “So you’re saying there’s a chance?” Even if the stock didn’t go to zero, the loss could have been significant.  

Today, Craig notes that the ceiling is roughly the new floor. This adds some clarity for CCL stock investors. Simply put, bulls will believe that the worst is over. And that means that investors have a pretty clear sense of how far Carnival stock may drop. 

That makes it easier to enter a position in CCL stock. 

Seeing Through a Crystal Ball Darkly 

Easier, however, doesn’t mean without any concern. Here I would point you to my InvestorPlace colleague Larry Ramer. In his recent article, Ramer described just how tricky getting restarted will be.

And with fears of the delta variant giving public health experts ammunition, it’s not unthinkable that Carnival’s relaunch would be short-lived. 

And there’s also an issue about proof of vaccination. Currently Carnival is requiring that passengers be able to provide proof of vaccination. At this point, just getting passengers on board will be a welcome sight.  

However, the way I see it, there three kinds of people. There are those that would get on a cruise ship tomorrow without a second thought. There are those who will never set foot on a cruise ship again. But those are the extremes. The vast percentage of Americans lie somewhere in between. And many of those potential passengers, for many reasons, are not vaccinated. It will be difficult for cruise lines to get back to normal if a significant percentage of their customer base is unable to cruise. 

Is CCL Stock a Buy? 

Investing would be a lot easier if we had a clear idea of how much revenue Carnival could deliver. We don’t, and the revenue picture is likely to be murky for some time. Still, the likelihood that cruise ships being to sail lowers the risk premium on CCL stock.  

So the questions to ask about CCL stock are how high do you think it can go? And how long are you willing to wait for it to get there? That’s the only issue that matters. Alex Sirois wrote that, at this point, 2022 bookings are larger than in 2019. If that’s the case then a bullish bet may be worth it.  

I still think there will be obstacles along the way that will keep CCL stock range-bound for the foreseeable future. If that’s the case, there’s no hurry for you to make your decision. I’m going to remain consistent with my recent takes. If you’re looking at Carnival as anything more than a swing trade, history suggests you’ll have to be willing to hold for at least another year.  

On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. 

Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for InvestorPlace since 2019.

Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.


Article printed from InvestorPlace Media, https://investorplace.com/2021/07/be-prepared-to-take-long-voyage-with-ccl-stock/.

©2024 InvestorPlace Media, LLC