Carnival Stock

[npcl]

19 minutes ago, JT1962 said:

 

I think the key section of the article is this:

 

“Analysts at Deutsche Bank see a “U” shaped recovery for the industry, with normal business not returning until as late as 2023. The trough will depend on how cruisers respond to the threat from coronavirus.

 

“Whether things ultimately pan out this way depends in large part on consumers’ willingness (and financial ability) to return to the seas,” Deutsche Bank said in a note to clients. “We believe there is a sizeable contingent of cruise enthusiasts/loyalists who will board as soon as they are able to do so again, but we also believe there will be many (particularly first time would-be cruisers) who may hesitate to get on a ship for a certain period.”

 

The cruise lines have enough cash to get through 2020, if needed. The real issue as I see it is 2021 going forward. Many of those booking cruises for next year are, or will be, using future cruise credits, so those will not generate much cash for the cruise lines other than onboard spending. If new cruisers drop substantially, and / or previous cruisers are hurt financially and are unable to book again soon after using their future cruise credit, the cruise lines will struggle for the next several years. The true cost of Covid-19 on the cruise industry may not be known for 3-4 years.

 

At a time when they will have record how debt loads, with established payment times that will be in the impacted timeframe.  Will be very difficult for them to get through that period.

[npcl]

19 minutes ago, travelhound said:

I don't think we will see significant upward movement in the stock until they resume operating.  The real question is where do think the stock will be in 2-3 years.  If Carnival survives, which looks likely, probably $30-55 range, which is a 300-500% return from the current price.

One other note with the new stock offering, with the convertible bonds.  The same market cap that CCL had at its peak would map to $35 stock price with the new dilution.  

 

So for it to get to that level it have to be back at what was its most profitable period ever in its history. The literal golden age of cruising.  2-3 year at best might be in the $16 to $20 range.

[travelhound]

8 minutes ago, npcl said:

One other note with the new stock offering, with the convertible bonds.  The same market cap that CCL had at its peak would map to $35 stock price with the new dilution.  

 

So for it to get to that level it have to be back at what was its most profitable period ever in its history. The literal golden age of cruising.  2-3 year at best might be in the $16 to $20 range.

The peak was $72.70 on 1/30/18,  I don't think it will get back to that level any time soon, partly due to the dilution, but the price targets that I have seen, $30-55, seems reasonable in 2-3 years.

[Ombud]

I'm not seeing that although I'd be happy with $27.91

[npcl]

4 minutes ago, travelhound said:

The peak was $72.70 on 1/30/18,  I don't think it will get back to that level any time soon, partly due to the dilution, but the price targets that I have seen, $30-55, seems reasonable in 2-3 years.

I used the 52 week high  prior to the start of Corona (all of 2019) which was $58.82 and already in a down trend even prior to Corona. You do know how many shares the convertible shares convert to don't you CCL issued 1.75 billion in convertible at a conversion price of $10 per share. resulting in 175 million new shares plus the 62.5 million in the new equity offering, plus the underwriter fee of another 9.375 million shares that means the liquidation prior to the start of the year is an additional 246.875 million shares added onto the existing 527,817,680 shares so a market cap of 31 billion at the high of 2019, yields a new stock price of 40.01 just on current dilution (because if the price goes up all of the convertible will get converted).

 

If you use the stock price just prior to corona virus hitting the scene which was 51.9 the price yields 35.2.

 

If you add in the reason why CCL was trending down for the year prior to Covid-19,  margin shrinking, then add in the increased debt load, the loss of revenue in 2021 due to FCC's, the psychological impact on bookings, the recession impact on bookings (this is expected to be worse than the recession of 2009, so take a look back at booking numbers there. 

 

There is no way it will be trading at a market cap anywhere close to its 2019 numbers in 2-3 years.

 

[travelhound]

7 minutes ago, npcl said:

 

 

There is no way it will be trading at a market cap anywhere close to its 2019 numbers in 2-3 years.

 

Maybe not, but even at $30, that would be a significant return.  

[npcl]

12 minutes ago, Ombud said:

I'm not seeing that although I'd be happy with $27.91

The book value is calculated off its last report.  So the new debt and dilution is not in those numbers.  Even the next 10Q will not reflect dilution from the convertible but if you factor those in the book value drops to 24.14.

 

Analysts, in general, use reported data so take a while to catch up to black swan events.

[Ombud]

I still turn a profit at 24

[npcl]

1 minute ago, travelhound said:

Maybe not, but even at $30, that would be a significant return.  

But to even get to 30 it has to be back in the range of the profitability of last year, with its debt loads back to where it was then.  It fundamentals are not going to be anywhere close in 2-3 years, plus it is not going to be perceived as the growth industry with large number of new build ships coming and sailing full as fast as they are built.

 

After its last bottom in 2009 it took five years to get above $40 per share in a much better situation than now. All they had to worry about then was having to reduce fares to fill ship

[npcl]

2 minutes ago, Ombud said:

I still turn a profit at 24

Yep, if it does not have to restructure at some point.

[travelhound]

55 minutes ago, npcl said:

But to even get to 30 it has to be back in the range of the profitability of last year, with its debt loads back to where it was then. 

The current consensus price target of all the analysts that follow the stock is $39, and that's taking into account current debt loads.  So I would say that $30 is probably a conservative number in 2-3 years.

[caribill]

3 hours ago, JT1962 said:

 

I think the key section of the article is this:

 

“Analysts at Deutsche Bank see a “U” shaped recovery for the industry, with normal business not returning until as late as 2023. The trough will depend on how cruisers respond to the threat from coronavirus.

 

 

 

Although normal business may not return until that time, bookings for 2021 are ahead of what bookings for 2020 were at this time last year and that includes many new bookings that are not just those using up FCCs from cancelled cruises.

 

Much of a cruise line's profits come from on board spending, so even people who booked using FCCs will spend money on board. Yes, many people spend very little wheile on board, but many others do not have included beverage packages and also book ship's excursions.

[npcl]

1 hour ago, travelhound said:

The current consensus price target of all the analysts that follow the stock is $39, and that's taking into account current debt loads.  So I would say that $30 is probably a conservative number in 2-3 years.

Are these the same analysts that are projecting a return to profitability in Q3.  Good luck.  

 

Most analysts model the information filed by the company.  Done to limit liability. Not very good at projecting major changes, especially in sudden events like this. 

 

Will be entertaining over the next couple of quarters as the data in their models are updated watching their estimates come done.  

[npcl]

16 minutes ago, caribill said:

 

Although normal business may not return until that time, bookings for 2021 are ahead of what bookings for 2020 were at this time last year and that includes many new bookings that are not just those using up FCCs from cancelled cruises.

 

Much of a cruise line's profits come from on board spending, so even people who booked using FCCs will spend money on board. Yes, many people spend very little wheile on board, but many others do not have included beverage packages and also book ship's excursions.

Where are you getting any information that the new bookings are not FCC based.  Source please?  CCL has not provided any breakdown on the new bookings that I have been able to find.

 

Approximately 25% of revenue of the mainstream lines come from onboard spend   With occupancy rates around 105% (lower berth capacity) these past few years profit as run in the 10-15% range(14.3% for the last full year of CCL), (record highs for the industry) so certainly without  on board spend they would not be profitable. A little misleading to say that their profits come from on board spend as it is only 25% of revenue.  One could also consider that they become not profitable very quickly if their occupancy drops much below 100%

Edited April 17, 2020 by npcl

[travelhound]

3 hours ago, Ombud said:

I still turn a profit at 24

Yup, it doesn't take much, after a significant drop.

[cruzsnooze]

1 hour ago, npcl said:

Where are you getting any information that the new bookings are not FCC based.  Source please?  CCL has not provided any breakdown on the new bookings that I have been able to find.

 

Approximately 25% of revenue of the mainstream lines come from onboard spend   With occupancy rates around 105% (lower berth capacity) these past few years profit as run in the 10-15% range(14.3% for the last full year of CCL), (record highs for the industry) so certainly without  on board spend they would not be profitable. A little misleading to say that their profits come from on board spend as it is only 25% of revenue.  One could also consider that they become not profitable very quickly if their occupancy drops much below 100%

Casino and alcohol sales are major revenue sources.

[npcl]

39 minutes ago, cruzsnooze said:

Casino and alcohol sales are major revenue sources.

As are excursions, the stores, Spa, etc. All of it makes up the 25% of revenue the mainstream lines get from on board spend.

[travelhound]

3 hours ago, cruzsnooze said:

Casino and alcohol sales are major revenue sources.

That's true, I used to work in the travel industry.  The base cost for a cruise is a give away.  Why do you think Disney cruises are so expensive, it's because no casino or alcohol sales.

[caribill]

9 hours ago, npcl said:

Where are you getting any information that the new bookings are not FCC based.  Source please?  CCL has not provided any breakdown on the new bookings that I have been able to find.

 

 

I said not all new bookings are FCC based. Sorry, but I do not remember the source. I have read a number of analyses and announcements recently and I do not remember which ones contained that info.

[EscapeFromConnecticut]

https://amp.usatoday.com/amp/2868160001
 

Morgan Stanley on the rise in 2021 bookings:

 

   "Most of these (customers) are simply rebooking cancelled 2020 credits using cruise credits."

[JT1962]

That's true, I used to work in the travel industry.  The base cost for a cruise is a give away.  Why do you think Disney cruises are so expensive, it's because no casino or alcohol sales.

While Disney cruises do not have a casino onboard, they do sell alcohol.

[MissP22]

3 hours ago, EscapeFromConnecticut said:

https://amp.usatoday.com/amp/2868160001
 

Morgan Stanley on the rise in 2021 bookings:

 

   "Most of these (customers) are simply rebooking cancelled 2020 credits using cruise credits."

They really don't like to say how many of those bookings are actually new ones. I'm sure it's going to be a hard sell until they have a reliable vaccine. 

[travelhound]

5 hours ago, JT1962 said:

 

While Disney cruises do not have a casino onboard, they do sell alcohol.

 

Most Disney ships do not have casinos, so they don't get the revenue that other lines do from gambling and alcohol.

Edited April 18, 2020 by travelhound

[voljeep]

8 minutes ago, travelhound said:

But they don't get the revenue that other lines do from casinos and alcohol.

does Disney still allow you to bring beer on board ?

[travelhound]

5 minutes ago, voljeep said:

does Disney still allow you to bring beer on board ?

They do, but since it is more family focused, alcohol sales are significantly lower.