Is Carnival Stock A Buy Right Now? Here’s What Earnings, Chart Show| Investor’s Business Daily

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The benefit to cruise line Carnival (CCL) from the new pandemic-fighting stimulus package was short-lived. CCL stock rose a little, then a day later it retreated a bit.


Investors bid up CCL shares 5.7% the day Congress passed the measure. CCL shares retreated a fraction the next day.

CCL’s publicly traded rivals behaved similarly. Royal Caribbean (RCL) rose 2.48%, then fell less than one point the next day. Norwegian Cruise Line Holdings (NCLH) rose 6.15, then was flat.

Why didn’t the $900 billion aid package help those stocks more? The bill offers a helping hand to individuals and businesses battling the coronavirus. But, for starters, President Trump has refused to sign it.

CCL Stock: No Direct Benefit From New Stimulus Package

In addition, the package offers no aid specifically to the cruise industry. In contrast, the bill — if signed in its current form — offers airlines $15 billion in new payroll support.

And investors may be worried that a new strain of the coronavirus wreaking havoc in the U.K. could spread to the U.S. and elsewhere.

For the moment at least, those issues seem to outweigh investor optimism driven by the start of Covid-19 vaccinations.

Glum Reality

That leaves a glum reality: Carnival Cruise Line group has canceled U.S. embarkations through at least Jan. 31.

Departures from select ports by the namesake cruise line of parent company Carnival are pushed back even longer. No Carnival ships will shove off from Baltimore, Charleston, Jacksonville, Fla., Long Beach, Calif., Mobile, Ala., New Orleans and San Diego until at least Feb. 28.

And Carnival Legend will not steam out of Tampa through March 26.

CCL Stock Readies For Test Voyages

Parent-company Carnival is in the midst of building a plan to meet the requirements of the framework for a phased resumption of cruise ship passenger voyages, issued Oct. 30 by the federal Centers for Disease Control and Prevention.

The new CDC framework replaces the agency’s eight-month no-sail order.

The initial phase of lifting the CDC’s ban on U.S. voyages will include testing and additional safeguards for crew members. “CDC will ensure cruise ship operators have adequate health and safety protections for crew members while these cruise ship operators build the laboratory capacity needed to test future passengers,” the health agency said.

Later phases will include simulated voyages to test cruise ship operators’ ability to control coronavirus risk.

CCL’s Recent Quarterly Report

CCL reported a smaller-than-expected third-quarter $2.19 billion loss. In the same quarter a year earlier, CCL reported EPS of $2.63.

The good news is that passenger bookings for the second half of 2021 were at the higher end of CCL’s historical range, though prices are down by mid-single digits vs. last year.

CCL held customer deposits as of Aug. 31 totaling $2.4 billion. Most are in the form of credits for canceled trips. Deposits were $2.9 billion last year.

Carnival Is Paring Its Fleet

In mid-September, Carnival also said it will sell at least 18 ships — 20% of its fleet.

“This will generate a 12% reduction in capacity and a structurally lower cost base, while retaining the most cash generative assets in our portfolio,” Carnival said on Aug. 31.

“With two thirds of our guests repeat cruisers each year, we believe the reduction in capacity leaves us well positioned to take advantage of the proven resiliency of, and the pent up demand for cruise travel — as evidenced by our being at the higher end of historical booking curves for the second half of 2021.”

Fleets Morph Into Ghost Ships

Entire cruise-line fleets sit empty and forlorn. They are docked or moored, without a passenger onboard. Formerly grand vacation vessels have morphed into virtual ghost ships.

But at some point things will reverse. Gloom will yield to hope. Ships will steam again. After all, airlines have not shut down entirely. At some point, money will flow once more into cruise line coffers.

Amid the prospect of better times at some future point, is this the time to buy CCL stock? Here’s what Carnival earnings and chart show.

CCL Stock: What’s In The Carnival Fleet

Carnival owned nine cruise lines, including its namesake Carnival Cruise Line as well as marquee lines Princess Cruises, Holland America Line and Cunard, as of Nov. 30, 2019.

The combined fleets consist of more than 100 ships. However, amid the coronavirus pandemic cruise freeze, the company is getting rid of less efficient ships. Carnival is focusing on ships with upgraded features.

Carnival is incorporated in Panama. Its operational base is in Miami. CCL stock is dual-listed on the New York and London stock exchanges. The London stock trades in the U.S. as an ADR CUK.

The 48-year-old company lays claim to the title of world’s largest leisure travel company. It is also the world’s largest cruise company, carrying nearly 45% of global cruise passengers.

CCL Stock: Coping With Change

The freeze on U.S. cruising gives the company a chance to replace less efficient ships with newer models. Those upgrades also demonstrate a willingness to invest in environmentally friendly technologies. That brings smiles to the faces of eco-conscious passengers and investors.

Carnival is also pouring money into an entertainment arms race. One ship will feature what Carnival calls the first seaborne roller coaster. Another ship will showcase Shaq’s Big Chicken Restaurant and an expanded water park. The latter is expected to be popular with families sailing with their children.

And consumers remain interested in cruises, despite Covid-19 concerns and the pause in cruises. Even though Carnival has spent much less to market cruises, the company said in June that it “is seeing growing demand from new bookings for 2021.”

For the six weeks ended May 31, roughly 67% of 2021 bookings were new. The remainder were from guests applying credits from canceled cruises.

Fundamentals For CCL Stock

CCL stock ranks a modest 25th out of 37 stocks in IBD’s Leisure-Services industry group, according to IBD’s Stock Checkup tool. The group itself ranks No. 14 out of IBD’s 197 groups.

The group had been all but shipwrecked by the coronavirus pandemic. But, perhaps on improving prospects, its group rank has improved significantly in recent month.

CCL stock has an IBD Composite Rating of 25. That means Carnival shares lag 75% of all stocks on a number of technical and fundamental factors, including price performance and earnings.

Generally, CAN SLIM investors consider only stocks with a score of 90 or higher on the 1-to-99 scale.

More Fundamental Analysis

CCL stock sinks to a low 7 for its Earnings Per Share Rating. The 7 Rating is terrible but not surprising given the coronavirus pandemic’s impact on vacation cruising. It means that Carnival’s earnings per share growth has outperformed just 7% of all publicly traded companies in earnings.

Stocks with EPS Ratings of 80 or better have the best chance of success. Keep in mind, too, the company could rack up huge losses in 2020. The EPS Rating could plummet further this year.

The stock has an IBD SMR Rating (Sales + Profit margins + Return on equity) of D. That shows that Carnival is below average among all publicly traded stocks when it comes to the composite profitability measurement.

The Cruise Line’s Technical Ratings Are Weak

When investors are looking for top stocks to buy, they want to see a stock shaping a proper chart pattern. IBD’s long-term research shows that certain chart patterns are the launchpads that kick off virtually all major stock moves.

CCL stock’s last breakout was in 2017. In March of that year it broke out from a flat base. But on Jan. 30, 2018, it began to downtrend. On some downturn days, volume was four times above average, a bearish sign.

This year, once news broke of an epidemic in China, Carnival stock plunged from above 50 to an April 2 low of 7.80. It has trended higher since, closing below 21 on Christmas eve.

It’s trading above both its 200-day and 50-day moving averages.

Investors look for a stock to regain its 50-day average before jumping in.

Additional Technical Analysis On CCL Stock

CCL stock’s Relative Strength (RS) Rating of 47 is weak, but up from a moribund 16 a month ago. It is far short of the 80 minimum investors look for.

The best stocks tend to have an RS of 80 or better as they start a new climb. IBD’s proprietary RS Rating ranges from 1 (worst) to 99 (best), measures a stock’s price performance in the last 12 months against all other stocks.

Still, the stock has an IBD Accumulation/Distribution Rating (A/D) of B on an A-E scale with A+ tops. Its rating is up from C in the fall. That B rating indicates moderate net buying by institutional investors such as mutual funds.

Big backing by funds helps stocks break out.

As of Sept. 30, the stock was held by 1,094 mutual funds, according to data from MarketSmith. That was down from 1,151 as of June 30 and 1,439 as of Dec. 31.

Bottom Line: Is CCL Stock A Buy?

Where does all of this leave CCL stock? The stocks looks poised for a bon voyage once the coronavirus pandemic is truly tamed. But it may still be too soon.

Meanwhile, growth stock investors generally should focus on the best stocks in the stock market’s leading industry groups. Neither Carnival’s Leisure-Services industry group nor the cruise line company itself meet that standard. The group is a laggard. The company is an also-ran in its group.

And the outlook for a resumption of cruising is weak.

Until Relative Strength improves, you might be better off giving up your stateroom on this cruise line company to someone else. CCL stock is not a buy.

Follow Paul Katzeff on Twitter at @IBD_PKatzeff for tips about retirement planning and active mutual fund managers who consistently outperform the market.


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