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Wednesday, January 19, 2022

Carnival Corp (NYSE:CCL) Stock Takes a Hit on Covid-19: Time To Buy?

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The coronavirus pandemic has resulted in widespread lockdowns, and consequently, it has led to immense value destruction for a range of industries. One of the hardest industries is the cruise industry, and like many of the cruise stocks, Carnival Corp’s (NYSE:CCL) stock has also experienced steep declines in recent months.

Key Analysis

Since all cruises have been stopped for 100 days (or until the situation changes), the company is earning no money, and it is doubtful whether customers are going to get back to cruises when the lockdowns are lifted. The stock has crashed from its 52-week high of $56.04 a share to $13.90 per share. However, it could be worthwhile to take a closer look at the company.

That being said, Carnival (NYSE:CCL) has taken advantage of a credit facility worth $3 billion and also raised capital to the tune of $4 billion at a steep interest rate of 11.5%. Lastly, the company also sold stock worth $2 billion. Carnival needs $1 billion per month to keep its fleet of ships in shape, and under the current circumstances, the company can remain afloat for nine months.

Arnold Donald, the Chief Executive Officer of the company, stated that although the current situation has been devastating for the company, people will eventually return to cruises when lockdowns are lifted.

He went on to state that Carnival has already started taking bookings, and the bookings for 2021 have been strong so far. At this point in time, the price of cruises is at rock bottom, and that may have prompted many people to book a cruise at a heavily discounted price. In addition to that, Carnival, like many other cruise operators, are also offering cancellations at 48 hours’ notice. While it creates uncertainty for the company, it’s one way of attracting customers.

There are definite risks with regards to the stock, but investors could consider holding a small position in CCL stock at this point. However, one must also recognize the associated risks.

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