Headquartered in Miami, Florida, cruise operator Carnival Corporation (NYSE:CCL) is known for providing an escape from the drudgery of day-to-day life. Yet, there is no escaping the fact that CCL stock hasn’t fully recovered since the onset of the Covid-19 pandemic.
Over the past two years, Covid-19 variant strains have made it difficult for people to feel comfortable going on cruises. This, of course, has weighed on Carnival’s top and bottom lines.
It is frustrating, no doubt, for CCL stockholders who hoped for a powerful rebound. Still, we can identify signs of a less restrictive environment for cruises, and that is certainly encouraging.
On the other hand, it is probably not a great time to take a large share position in Carnival. Until the company’s financial situation improves dramatically, investors might choose to wait before getting on board this perilous ship.
A Closer Look at CCL Stock
Let’s try our hand at a little bit of math. The pre-Covid-19 pandemic price point for CCL stock — and a seemingly reasonable long-term target — is $52. It is difficult to determine how long it will take the stock to get there. Currently, the Carnival share price is close to $20. From there, a 160% rally would be required to get back to $52.
That is asking for a lot. So, it will likely take a while for CCL stock to reach that target. Don’t be too surprised if it doesn’t happen this year. Along the way, the resistance levels to watch are $23 and $30. Those levels have been battle zones in the past, fought fiercely between the buyers and the sellers.
Perhaps adopting a long-term time horizon — and keeping one’s position size small — can boost a loyal investor’s confidence in CCL stock.
Ending the Mandate
At the end of 2021, as if the year hadn’t been challenging enough for Carnival, the U.S. Centers for Disease Control and Prevention (CDC) advised against going on cruises regardless of people’s vaccination status. With that, the CDC raised its travel warning for cruises to the highest level. This, as you might expect, dealt a major blow to the bullish thesis for CCL stock.
Despite all of that, Carnival proceeded to extend its Book with Confidence program in January 2022. In this program, Carnival’s customers can “change their vacation plans up to 30 days prior to the day of departure, receiving cancellation fees as a future cruise credit to then book another voyage when the time is right.”
Furthermore, Carnival just recently announced the ending of its on-board mask mandate. Specifically, masks on board will be recommended, but not required, starting with Carnival’s cruises departing Mar. 1.
Not Out of the Woods Yet
Carnival also announced that it would continue to meet the standard of vaccinated cruises, though children under five years of age “will not be included in any vaccinated guest calculation.”
Another positive news development is that Carnival’s entire Costa Cruises fleet will resume operations this year. This is huge news for Carnival, as Costa’s program includes over 1,800 cruises from spring 2022 to winter 2022 to 2023.
These are all good signs, but don’t assume that CCL stockholders are out of the woods yet. Even beyond the stock’s technical damage from the past two years, there are financial issues to overcome.
Starting with the top-line results, Carnival posted $20.825 billion in revenue in 2019. However, the annual revenue sank to $5.595 billion in 2020, and then to just $1.908 billion in 2021.
That is not what a strong recovery looks like. Turning to the bottom-line results, Carnival reported $2.99 billion in 2019 net income. Unfortunately, though, the company posted a $10.236 billion net loss in 2020, followed by a $9.501 billion net loss in 2021.
The Bottom Line on CCL Stock
Financially, Carnival has a lot of catching up to do. This might help to explain why CCL stock has yet to recover to its 2019 levels.
This shouldn’t be a huge problem if you can handle the risks of investing in the U.S. cruise market. Plus, it helps if you have a long-term time horizon. Therefore, CCL stock investors should be patient and not expect quick returns. If you hold on long enough, though, your ship should eventually come in.
On the date of publication, David Moadel 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.
