All Bets Are off on Carnival Cruise Stock as the Delta Varient Adds More Volatility


Carnival Cruise (NYSE:CCL) stock had been making a nice comeback. However, it faces a continuous threat from the novel coronavirus as the delta variant makes its way around the U.S.

Carnival cruise (CCL) ship on the water
Source: Ruth Peterkin /

As a result, CCL stock has been extra volatile as of late. 

When Covid-19 hit the U.S., cruise operators were hit with no-sail orders. That makes sense for anyone that saw the news since cruise ships were stranded offshore with sick passengers as the virus made its way around the ship. 

As the case count collapsed in the U.S. amid the federal government’s vaccination push, many grew optimistic that Carnival Cruise would be on the mend, but not just CCL stock. 

It also included Royal Caribbean (NYSE:RCL), Norwegian Cruise Line (NYSE:NCLH), casino operators, airlines, travel sites and more.

Basically, any travel- or entertainment-related business that was hobbled was supposed to make a strong comeback as vaccination rates continued to climb. 

Open for Sailing, for Now

The problem is the growth in vaccination counts continues to slow. Chalk it up to a new vaccine method, politics, anti-vax — whatever.

The point is, vaccination against Covid-19 is stalling and likely no amount of marketing, sweet talk or pleading is going to change that.

At the same time, we’re seeing the Covid-19 case count explode higher. If that trend continues, lockdowns may very well be back on the table. For cruise operators, that means no-sail orders become a possibility again. 

Every business and industry was impacted in 2020 because of the virus. Of the ones that survived though, not many saw revenue fall 99% or more. However, that was the case for Carnival. The company experienced three consecutive quarters of 99%-plus revenue declines. Last quarter, sales fell about 93%.

That said, demand for cruising remains strong and avid cruisers are anxious to get back out on the water. The demand hasn’t gone anywhere, but the “supply” — the ships on the water — has evaporated. 

We’re now seeing cruise operators get boats back out in the water. If Carnival and its peers can continue to operate, then these businesses have upside, but the ability to continue operation is the wild card here. 

Carnival Got Rocked

The company was forced against a wall during Covid-19. It wasn’t fair, and it wasn’t Carnival’s fault. What company would be prepared for this type of rapid lockdown? 

Virtually none — or none that I can think of at least. 

Carnival was forced to sell more stock and take on additional debt to stem the bleed of cash flow and continue to cover its overhead expenses. While that has resulted in a weakened balance sheet, worse financials and a higher valuation for CCL stock, it was that or go out of business.

However, those investing in this company should be aware of the situation. Total debt went from $11.5 billion at year-end 2019 to $32.2 billion at its most recent quarter.

Further, analysts expect the company to experience a roughly 40% decline in revenue this year (crazy, I know) and for Carnival to lose $5.45 per share in fiscal 2021. So we’re definitely not out of the woods although the situation appears to be improving. 

Even in 2022, estimates call for revenue of $18.2 billion and earnings of just 32 cents per share. Both figures would be below 2019’s results, assuming they come to fruition.

That said, it’s way too early to know how 2022 will shape up…there are still plenty of questions for 2021!

So what’s the bottom line? 

I think you could justify a long position in CCL stock so long as the company is allowed to continue sailing. At most, I would use a stop-loss of roughly $17.50 and here’s why.

Trading CCL Stock

Daily chart of CCL stock
Click to Enlarge
Source: Chart courtesy of TrendSpider

You can literally see the impact of Covid-19 and the “sell-the-news” reaction in CCL stock when looking at the chart. 

Notice the rally up to $31.50, which ultimately served as resistance. That was in early June, ahead of the reopening for sailing a few weeks later. That “sell-the-news” action combined with the recent jump in Covid-19 cases has Carnival under a lot of pressure. 

CCL stock is struggling to regain the 200-day moving average but did a nice job holding up around $20. Bulls who want a tighter leash than $17.50 can use the July low as their stop-loss (around $19). 

A break of that mark likely ushers in the $17.50 to $18.25 area. On the upside, look for a regain of the 200-day moving average. That could put the $24.50 mark in play, followed by a push to the 50-day moving average, then $30. 

On the date of publication, Bret Kenwell 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.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.

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