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Carnival Stock Below $10

Lee Cruiser

By Lee Cruiser,
in Carnival Cruise Lines

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tidecat

tidecat

Posted
Posted

Carnival is supposed to release earnings tomorrow, although I wonder if that will be delayed given the severe weather in Florida this week. Although I guess as long as the 10-Q got done then the call could be held from anywhere.

 

The market as a whole has still priced in a recession, mainly one that might be the result of central banks (not just on the US) trying to cool inflation.

 

The company still needs to crank out quarters with positive cash flow.  Assuming that happens it will be easier to refinance the mountain of debt at more favorable terms, even if interest rates remain elevated. At 11/30/19 Carnival had about $14 Billion in dept excluding customer deposits (which were nearly another $5 Billion). After finishing the second quarter at around $35 Billion, this is probably still a 7-10 year project.

 

The street is expecting a loss of around $0.15/share. Keep in mind Carnival is carrying a substantial amount of depreciation-around 50% of its operating expenses-so the operating cash flow is generally better than net income.  The ship building orderbook is starting to thin out, so the cash out for investing activities should start to go down in the months ahead.

 

I also expect further dilution to take place next year, which will complicate things for anyone trying to make a short term play 

 

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Inveterate Cruiser

Inveterate Cruiser

Posted
Posted
5 hours ago, gkbiiii said:

The current stock price is $9.16 as of 9/29/22, what is the long/short term viability for this company?

 

In June 2022, Morgan Stanley’s Jamie Rollo outlined a worse-case scenario: Carnival stock could fall to $0 in the event of a global economic downturn. “If there is a demand shock that causes trip cancellations or weak bookings … liquidity could quickly shrink,” 

 

The liquidity is in reference to Carnival's debt obligations - that Carnival has a mountain of debt that needs to be refinanced periodically. If it cannot refinance at any point of time, it will need to go into bankruptcy.

 

CCL, RCL and NCLH all had to take on a lot of debt to survive the pandemic. All have a lot more debt on their books than pre-COVID - Carnival most, Norwegian least. I think there are better investments out there - these are better for shorter-term trades.

 

If you are looking to buy CCL stock for shareholder OBC then sell it after you get the credit.

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BlerkOne "Live from...." Rare

BlerkOne

Posted
Posted
42 minutes ago, mz-s said:

They said they were going to turn a profit over 6 months ago, didn't happen, they are trying to cut amenities to the bone but that is forcing prices down which is forcing deeper cuts which is a vicious cycle.

Before Russia invaded Ukraine, Omicron really taking off, oil prices through the roof, a recession, stuff like that.

 

I'm surprised some are blaming Carnival for cutting back on the stock price.

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Inveterate Cruiser

Inveterate Cruiser

Posted
Posted
2 hours ago, tidecat said:

Carnival is supposed to release earnings tomorrow, although I wonder if that will be delayed given the severe weather in Florida this week. Although I guess as long as the 10-Q got done then the call could be held from anywhere.

 

The market as a whole has still priced in a recession, mainly one that might be the result of central banks (not just on the US) trying to cool inflation.

 

The company still needs to crank out quarters with positive cash flow.  Assuming that happens it will be easier to refinance the mountain of debt at more favorable terms, even if interest rates remain elevated. At 11/30/19 Carnival had about $14 Billion in dept excluding customer deposits (which were nearly another $5 Billion). After finishing the second quarter at around $35 Billion, this is probably still a 7-10 year project.

 

The street is expecting a loss of around $0.15/share. Keep in mind Carnival is carrying a substantial amount of depreciation-around 50% of its operating expenses-so the operating cash flow is generally better than net income.  The ship building orderbook is starting to thin out, so the cash out for investing activities should start to go down in the months ahead.

 

I also expect further dilution to take place next year, which will complicate things for anyone trying to make a short term play 

 

 

Tomorrow's ER will be interesting. I took my first ever Carnival cruise in August on the Vista and am Diamond on RCL. I would not invest in Carnival as an investor vs RCL - not just because Carnival has a higher debt level than RCL but also because Carnival's 'free' offerings are so much better than RCL - why would anyone want to do specialty dining when the free offerings are so good? Also, I saw very little upselling activity (specialty dining/drinks packages) on CCL vs RCL. 

 

As a customer, my family and I were very pleasantly surprised by Carnival as a result and will go back.  

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FSHLOT

FSHLOT

Posted
Posted
7 hours ago, BlerkOne said:

Before Russia invaded Ukraine, Omicron really taking off, oil prices through the roof, a recession, stuff like that.

 

I'm surprised some are blaming Carnival for cutting back on the stock price.

I think people are getting tired of CCL always blaming something/someone else. Always an excuse with them. 

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tidecat

tidecat

Posted
Posted
1 hour ago, FSHLOT said:

I think people are getting tired of CCL always blaming something/someone else. Always an excuse with them. 

This will also be the last quarter's results with Arnold Donald as CEO, as he stepped down August 1, about 2/3 of the way through Q3. It will be interesting to see if Josh Weinstein brings a different mindset.

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JT1962

JT1962

Posted
Posted (edited)

They also missed revenue estimates by over 1/2 a billion dollars also $ 4.31 billion actual vs $ 4.95 billion expected. 
 

Losses were expected to be $ .12 per share and were $ .65, so almost 5 1/2 times larger. 
 

Neither of those are good, especially with the debt load they have. With many ships sailing at 100% or more during the quarter, and still missing revenue numbers, they have a lot of work ahead.
 

https://www.theridgefieldpress.com/business/article/Carnival-Fiscal-Q3-Earnings-Snapshot-17477682.php

Edited by JT1962
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mz-s

mz-s

Posted
Posted
3 minutes ago, JT1962 said:

They also missed revenue estimates by over 1/2 a billion dollars also $ 4.31 billion actual vs $ 4.95 billion expected. 
 

https://www.theridgefieldpress.com/business/article/Carnival-Fiscal-Q3-Earnings-Snapshot-17477682.php

 

I'm not a financial advisor, I just stayed at a Holiday Inn Express last night. But I'd say that Carnival's latest strategy of a race to the bottom to sell cabins as cheap as possible and stretch the crew as thin as possible and cut every amenity they can is not working.

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JT1962

JT1962

Posted
Posted (edited)
10 minutes ago, mz-s said:

 

I'm not a financial advisor, I just stayed at a Holiday Inn Express last night. But I'd say that Carnival's latest strategy of a race to the bottom to sell cabins as cheap as possible and stretch the crew as thin as possible and cut every amenity they can is not working.


I would agree. I also wonder how much of the onboard spending increases they have been talking about during the last year were actually on board credit people received during the Covid cancellations. When people use that free onboard credit, it reduces the liability and increases revenue, but it’s not new or outside money.

Edited by JT1962
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mz-s

mz-s

Posted
Posted
1 minute ago, JT1962 said:


I would agree. I also wonder how much of the onboard spending increases  they have been talking about during the last year was actually on board credit people received during the Covid cancellations. When people use that free onboard credit, it reduces the liability and increases revenue, but it’s not new or outside money.

 

Good point. Speaking for myself at least, I lived high on the hog the cruises I had COVID OBC to blow. But since then I've spent like I did before. So at least for me, I'm not spending any more of my own money onboard than I did before COVID. Everyone's different of course, and some may choose to spend on the new room service shakedown or whatever. But I'm not sure that cutting cabin rates means more onboard spend. At least, the quarterly results don't appear to be showing that yet.

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firefly333

firefly333

Posted
Posted
On 6/13/2022 at 5:42 PM, ray98 said:

Not surprising.  Carnival took on $30B in high interest debt.  They are 2Y into their recovery plan and are still losing money by the day with all ships back in service.  Now we have record inflation, astronomical fuel costs and it appears a recession is in the near future.  During a recession discretionary income that is used for things like vacations dries up first.  The future is not promising for the cruise industry, particularly Carnival.

I'm really not sure why all the semantics about are we in a recession yet. 

 

Today cements 3rd qtr in a row of gdp that contracted. Changing the definition from what's widely accepted doesnt mean we arent in a recession.

 

Yes also inflation, especially wages, rent and food. Just because wages spiralling up and a tight labor market which is dropping btw .. doesnt mean also recession. Stagflation. And oil apt to pop higher this winter once we stop selling our reserves. Saudi and opec is meeting next week to discuss what to do to stop usa from manipulating oil prices. Possibly a cut in output to push up price. I'm also calling this wageflation as wages keep spiralling higher.  

 

Another 75 basis rate hike by powell in nov and maybe you and others will believe we have been in a recession for 3 qtrs now. Only 2 qtrs are needed for classic definition. 

 

Rcl has great sales for all. Carnival needs some sales for non casino. They are losing people. I cant tell you how many I see say they have only cruised carnival but trying rcl .. prices I see are just better on rcl. Be competitive carnival. Need a sale.

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Colorado Beach Bum

Colorado Beach Bum

Posted
Posted
29 minutes ago, mz-s said:

 

I'm not a financial advisor, I just stayed at a Holiday Inn Express last night. But I'd say that Carnival's latest strategy of a race to the bottom to sell cabins as cheap as possible and stretch the crew as thin as possible and cut every amenity they can is not working.

Maybe. Companies are making difficult decisions.  You have any thoughts on what a winning strategy might look like?

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lostsoulcruiser

lostsoulcruiser

Posted
Posted

Headline numbers were not good. Carnival reported higher food and fuel costs but if you look behind the headlines there was some good stuff.  Occupancy was up, onboard spending was up and future cruise bookings continue to rise and adjusted EBITDA was positive for the first time since COVID.  I wonder how much of the earnings report is a kitchen sink type report (throw in all the losses to clear the decks so to speak) since this is the first earning report under a new CEO (Weinstein vs. Donald).  

For those commenting on cheap cruises, last minute voyages have always been bargain basement prices.  I am scheduled to go on the Glory in April and the prices now are higher than the prices I booked at (balcony stateroom).  

I am not a financial advisor but I bought a few shares today at a bargain basement price. 

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mz-s

mz-s

Posted
Posted
15 minutes ago, Colorado Beach Bum said:

Maybe. Companies are making difficult decisions.  You have any thoughts on what a winning strategy might look like?

 

I reject the notion that you have to have a solution to be able to recognize something isn't working.

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cruisingguy007

cruisingguy007

Posted
Posted

Perspective matters, good article here with facts: https://www.marketwatch.com/story/carnival-stock-sinks-toward-a-30-year-low-as-losses-and-revenue-misses-keep-piling-up-11664548243?mod=mw_latestnews

 

The real problem facing Carnival is the economy, if every other recession/downturn/crash/reset (whatever you want to call it) is any indicator, people will react only after everything has come falling down. The writing has been on the wall for this one and the hazard lights have been blinking for well over a year now but are still being ignored by many. Cruising will be at the bottom of the list of priorities if things get worse, which they almost certainly will, no quick fix available, we've exhausted those options already and they are what got us here to begin with.  

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