Should You Really Invest in Carnival Stock Right Now? The Motley Fool

The U.S. Centers for Disease Control and Prevention (CDC) issued a new warning on Thursday, urging even fully vaccinated people to avoid cruise travel. The agency’s updated travel health notice points out that the COVID-19 virus spreads easily among folks in close quarters on cruise ships. The chances of catching the problematic virus are «very high» on ships, even for passengers who have completed the initial vaccination process along with additional booster shots. Nevertheless, cruise lines tend to have a passionate customer base with plenty of repeat passengers. Over the long term, cruise line stocks may be a good value investment provided you are comfortable with some volatility.

  • Through the first six months of the year, the company reported a net loss of $563 million, or $3.02 per share.
  • These are the cruise line stocks that had the smallest declines in total return over the past 12 months out of the companies we looked at.
  • Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice.
  • An author, teacher & investing expert with nearly two decades experience as an investment portfolio manager and chief financial officer for a real estate holding company.
  • It will take the company several years to get debt back down to a more comfortable level.
  • Argus Research analyst John Staszak is tepid on both RCL’s shorter- and longer-term outlooks, and maintains a Hold recommendation on the cruise stock.

Norwegian Cruise Line Holdings (NCLH -4.07%) is a hit among casual cruisers and is known for its laid-back atmosphere. Norwegian offers what it calls «freestyle cruising,» meaning its cruises have no dress codes, no set dining times, and no assigned seating. Royal Caribbean (RCL -3.11%) is distinguished as being one of the most innovative cruise lines.

Holtz hopes to return Royal Caribbean’s balance back to investment grade. The company closed on a $700 million refinancing deal earlier in February with RCI Holdings to repay principal payments on debt maturing between 2023 and 2024. The three major cruise lines, with $74 billion of debt combined, according to Bloomberg, face incoming competition from billionaires and hotels hoping to start their own fleets. Betting on the luxury tier and existing customer loyalty bases, these new entrants will be vying for a chunk of the premium market. Being the silver medalist in terms of size may not seem like a winning recipe for the best-performing cruise line stock, but there are a lot of advantages that Royal Caribbean has over its underperforming peers. The company’s brands include Carnival Cruise Line, Princess Cruises and Holland America Line.

Measuring Cruise Lines Debt

You have to look at the good, the bad, and the ugly to decide if a stock is worth boarding, disembarking, or riding out. The Direxion Daily S&P 500 High Beta Bull 3X Shares goes by «HIBL» on the NYSE ARCA. It’s only been around since Nov. 2019, but this fund aims to outperform the S&P 500 High Beta index. More than 80 percent of the 3X ETF goes toward financial instrument assets, but the remainder is a diverse array. Explore how you can make money from others’ adventures, including the frontier of space travel. Carnival could complete a reverse stock split to help reduce its outstanding share count.

The cruise line company ceased operations for several months, which had a devastating financial impact. Miami is a hot spot for cruise line companies, with the main offices of Norwegian Cruise Line Holdings’ (NCLH, $29.41) located there, as ig broker review well. The company operates 28 ships globally across several brands, including its namesake Norwegian Cruise Line, as well as Oceania Cruises and Regent Seven Seas Cruises. NCLH is planning to resume limited global operations in early July.

Before that, Carnival and its predecessors had paid quarterly dividends since 2001. Profitability is the most critical factor determining whether a company can grow shareholder value over the long term. Typically, a company’s stock price rises along with its earnings. You need to take a few steps before buying shares in Carnival (or any other stock).

  • This cruise line is still known for its reasonable prices and ability to offer a fun time for everyone.
  • And cruise line stocks recently took another recent hit after the U.S.
  • After purchasing Carnival stock, it’s essential to keep an eye on your investment.
  • It would cost about $1,550 to buy 100 shares of Carnival stock at that price point.
  • The cruise line industry is part of the broader travel and tourism industry, focused primarily on providing sea-based vacation experiences.

Operations may be returning to more normalized levels, but the company has a lot more debt on its books — just under $32 billion, to be exact. And macroeconomic challenges like high inflation, higher fuel prices, rising interest rates, trade99 review and foreign currency rate fluctuations are impacting its profitability. Like Carnival, Royal Caribbean shares plunged during the COVID bear market. The cruise line stock dropped from around $135 in February to below $20 by late March.

How expensive are cruises?

However, for high-risk and aggressive investors, Carnival and the other major cruise lines could also offer significant upside. However, Carnival doesn’t hedge its oil exposure, instead focusing on making its fleet more efficient. Since oil prices have risen in recent months, the company gave tepid profit guidance for Q4. In addition, the strengthening dollar will also lower earnings in the upcoming quarter. Meanwhile, management noted some costs may increase next year, such as dry-docking costs, labor costs, and the acquisition of three new ships.

What’s going on with Carnival today?

While five of the 18 following the stock maintain a Strong Buy rating, and two say it’s a Buy, seven believe Royal Caribbean is a Hold, two believe it’s a Sell and two rate it a Strong Sell. Their anticipated upside is telling, too; a PT of $86.23 suggests RCL shares are fairly priced at current levels. Wedbush analyst James Hardiman rates RCL stock at Outperform (equivalent of Buy) with a 12-month price target of $115, implying 33% upside from here. CDC guidelines have failed to provide a specific reopening date for cruise operators. Concerns that rising debt levels could negatively impact shareholder value are another hurdle. Take Norwegian Cruise Lines, which is planning to invest $2.4 billion in ship construction-related capital expenditures for 2023, and anticipates the figure to be $500 million and $1.8 billion for 2024 and 2025, respectively.

As Norwegian Cruise, Carnival Corporation, and Royal Caribbean continue to await their first post-pandemic voyage, baskets of stocks are working together to keep the sector afloat in the market. Carnival once was the world’s largest cruise line operator and is now second to Royal Caribbean after the stock lost over half its value in 2022. The cruise line’s Carnival Pride began sailing again in September 2021 — the first ship to set sail from the Baltimore cruise terminal in 18 months. Here’s some information about the three largest publicly traded companies in the cruise industry to help you make sound investment decisions if you choose to buy cruise line stocks in 2023. Global cruise lines are a major part of the larger travel industry that includes entertainment, leisure and hospitality management.

Carnival Cruise Lines: Buy, Sell, or Hold?

Carnival Corporation, which operates the largest number of cruises from the U.S., saw third-quarter revenue and earnings that exceeded expectations, driven by strong demand. Carnival’s sales forecasts are promising, with bookings for 2022 representing growth over 2019’s performance. The cruise line has also started opening earlier reservations for future cruises, which 12trader forex broker review led to a $630 million increase in guest deposits as of the third quarter of 2021. These vacation travel companies have survived the most difficult period. That being said, cruise line stocks are still a long-term play that could have some rough seas ahead. While many travel companies were affected by the pandemic, cruise lines were some of the most severely hurt.

Bank of America is projecting 2021 year-end net debt for Carnival, Royal Caribbean and Norwegian will be 100%, 77% and 47% higher than 2019 levels, respectively. At the same time, diluted share counts will also be 56%, 6% and 46% higher, respectively. “With a delay in revenue service, additional capital is key, and balance sheet stress could continue,” Didora wrote in the note. A market order is executed at the current market price, while a limit order allows you to specify a price at which you are willing to buy or sell the stock.

Although they have lots of upside potential, they also have lots of risk. This is a particularly great option for those who are new to investing. The know-how of a financial advisor can come in handy if you’ve never dabbled in the stock market. In fact, an advisor can help you hedge against losses by diversifying your assets across the market. This is also true if you’re close to retirement, since you’ll have the benefit of having your future under the watchful eye of an advisor.

Given that Carnival is actually still up a lot on the year — albeit far below pre-pandemic levels — investors sold the stock on fears of what was to come in the quarters ahead. While Carnival’s numbers came in ahead of expectations and demand remains strong, investors focused on rising costs, as well as a potential pushed-out timeline for the company’s debt paydown. You might be among those with an upcoming cruise booked on one of Carnival’s brands.

How the Stock Market Performed Under Each President

However, with over $31 billion of debt, Carnival clearly has a long way to dig. That means whenever oil prices rise or the health of the economy comes into question, the stock can see a big pullback, as we saw last month. The SPDR S&P 500 ETF Trust (SPY -0.5%) was the largest holder at nearly 100 million shares. However, the S&P 500 ETF had a tiny allocation at 0.04% of the fund’s total holdings, so there are better ways to gain exposure to Carnival.

According to Lindblad, a majority of guests opted for future travel credits over a refund for voyages that were cancelled or rescheduled due to the pandemic. The travel company has seen significant increases in its booking numbers, even compared to pre-pandemic times. In its third quarter 2021 financial results, it reported that 2022 bookings were 51% ahead of bookings for 2021 and 27% ahead of bookings for 2020. It was also one of the first to offer cruises in the price range of the average traveler.

Juan Maria Jimenez

View all posts