It’s Time to Pump the Brakes on CCL Stock Due to Extraneous Risks

It’s fairly safe to characterize the general sentiment surrounding Carnival (NYSE:CCL) stock as safe in the long term. The theory is simple: The broader cruise line industry is guaranteed to rebound. The industry is dominated by Carnival, Royal Caribbean (NYSE:RCL), and Norwegian Cruise Line (NYSE:NCLH).

CCL stock cruise stocks docked cruise ships
Source: Kokoulina /

For the duration of the pandemic the question has never been if the 3 major cruise lines, which account for 70-75% of the market based on market share and revenues, will survive. Rather, it’s been a question of which will emerge strongest and rebound the quickest.

At this point it’s nearly impossible to tell.

No Clarity

There looks to be little clarity regarding that conundrum. On the one hand, Wall Street is confident that CCL stock should move slowly upward. But that’s also true of the other two cruise lines that together represent an oligarchy.

 So, investors could choose any of the three and invest on the vague notion that their oligarchy is safe. They’ll likely make reasonable returns. That’s a fine strategy, but it’s basically the exact same thesis that has been evident since early in the pandemic. 

And even if investors establish a position in CCL now, there are no guaranteed quick returns. 

Declining for Last Month

When I last wrote about Carnival in late June, I was optimistic that it was on the correct path. This was immediately following the company’s June 24 earnings release. That release contained plenty of information to give cause for optimism. 

I noted: Carnival’s most recent figure indicates that 42 ships from 8 of its 9 brands have resumed operations, or will do so by Nov. 30. That means that 50% fleet capacity will have been reached by that date. Customer deposits are on the rise. The company saw an increase from the first quarter to the second quarter. In fact, booking volumes were 45% higher during the second quarter than in the first quarter.”

I also noted that cumulative advanced bookings for 2022 were ahead of those in 2019. 2019 was a strong year for Carnival and CCL stock traded between $45-$55 in that period. Those bookings reasonably indicate that it wouldn’t be out of order to assume a return to normalcy by then. 

All of that remains true. But CCL stock declined shortly after I wrote that. Share prices are down to $21 from $26 a month ago. That means that they’re essentially flat year-to-date. It also clearly indicates that I cannot time the market 

So I’m not going to suggest that investors jump in now because share prices are as low as they’ve been all year. 

Carnival’s Vaccine Requirements

Carnival is mandating that unvaccinated travelers must purchase travel insurance. That makes its future rebound murkier.

The company spelled out the requirements clearly: “All unvaccinated guests must provide proof of their travel insurance policy that covers at minimum $10,000 per person in medical expenses and $30,000 per person for emergency medical evacuation and without exclusions for COVID-19.”

All cruises departing from Florida will be subject to the requirements beginning July 31. Carnival ports include Jacksonville, Orlando, Miami, and Tampa.  

It is very easy to imagine a backlash hitting CCL stock as a result of the mandate. The arguments that the decision will slash demand are obvious. There are of course the costs of insurance. Those additional costs will deter a certain number of purchases. There is a real chance that the additional cost actually breaks the budget for a subset of passengers. 

There is also the politicized nature of vaccinations. Opinions remain polarized. I won’t get into that, but it is clear that Carnival runs a serious risk in that regard. 


Carnival remains very difficult to judge at this point. It looks fairly certain that the future is safe for the company. It will deal with the debt it incurred to maintain its fleet during the pandemic. But it should be able to handle that given its dominant position in the highly concentrated cruise industry. 

But given all the extraneous risks at this point I wouldn’t buy shares now even though they are relatively inexpensive.

On the date of publication, Alex Sirois 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 Publishing Guidelines.

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