Carnival Stock Is Going Absolutely Nowhere Now; Opportunity Remains

  • Carnival (CCL) investors need to understand the remainder of 2022 as it relates to the company. 
  • EPS expectations serve as a logical guide for investors.
  • Investors can play a wait-and-see game with CCL stock.
Carnival (CCL) cruise ship on water in front of beach with chairs

Source: Flickr

First of all, investing in Carnival (NYSE:CCL) stock still makes sense for the long-term. Plenty of upside remains. However, the question becomes: Does it make sense to invest in Carnival right now? The answer to that question is a bit more nuanced.

The basic answer is that there is little downside to waiting at this point. It is highly unlikely that CCL stock is going to jump upward by any significant degree anytime soon. There are simply too many headwinds facing the company at present. That said, the longer-term opportunity remains. Accounting for all those factors, here’s what I think investors should do.

CCL Carnival Corporation & plc $13.59

Understanding the 2022 Environment

It is paramount that investors understand the environment Carnival is facing in 2022. There’s plenty of reason for bullishness on Carnival this year. After all, we are at the tail end of the pandemic and there’s plenty of reason to believe that some modicum of normalcy has returned.

At least, that was what bullish investors were hoping for. And that is essentially true. People are basically free to travel. On top of that, on May 2, Carnival announced that it was the first major U.S. cruise line to return to full operations. 

But then several days later, a Covid-19 outbreak occurred on one of the company’s ships. Although there were no serious health issues as a result of the outbreak, it serves as a reminder that things haven’t fully returned to normal.

So, although investors have reason to be bullish, there are issues to overcome from the perspective of Covid-19 and regular operations. On top of that, there is another global issue affecting the company. That, of course, is the Russian invasion of Ukraine. The Invasion is spiking fuel costs, which is a major issue for the company. In short, if Carnival was hopeful that the pandemic was its only major externality, it was mistaken. 

Fundamentals

Externalities aside, Carnival is dealing with fundamental issues. The primary takeaway that investors have to understand is that Carnival won’t be very strong for the remainder of 2022. 

Firstly, a cursory overview of the company indicates that earnings per share (EPS) will remain negative throughout 2022. Current estimates are that the company will report an EPS of negative $1.66 this year. That figure is expected to turn positive next year, reaching $1.32 in 2023.

Combine that with the fact that the company posted an earnings miss in its most recent quarterly earnings and there’s little reason to be immediately bullish on CCL stock. 

Earnings Ahead

It’s hard to believe that CCL stock should move in a positive direction absent positive news. Simply put, a massive influx of capital isn’t going to occur until the company shows signs of approaching net income.

Given that EPS isn’t expected to become positive until 2023, that means capital will probably remain on the sidelines throughout the rest of this year. 

What to Do with CCL Stock

In other words, Carnival faces too many external issues right now that are affecting it on a fundamental basis. I still believe that the long-term outlook is strong. It’s just that there’s no reason to invest now because despite the economic reopening, there is little sign of normalcy at this point. And what Carnival needs is normalcy.

This all suggests that Carnival share prices will remain stagnant in the near term. 

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 InvestorPlace.com Publishing Guidelines.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks.Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.


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