Carnival Cruise Line On The Brink Of Completely Crumbling
Carnival Cruise Line has been hit with a falling stock price and is now at a 52-week low
Shares of Carnival Corporation collapsed to a three-decade low after a dismal third-quarter earnings report last week. Investors were left disappointed despite its cash flow turning positive for the first time since it resumed operations during the pandemic. The report revealed higher costs associated with inflation, supply chain disruptions, and the maintenance of health and safety protocols.
According to CNBC, Carnival’s shares shed 23% during trading last week. Its stock also closed at a 52-week low of $7.03, below its 2020 pandemic lows when shares traded around $7.80 intraday. This new round of losses cut the cruise liner’s market value by $2.5 billion. In a statement to Forbes, CEO Josh Weinstein said Carnival has seen a meaningful improvement in booking volumes. They are now running ahead of strong 2019 levels since the company announced relaxed pandemic protocols.
However, the cruise liner expects cash flow in the fourth quarter to be flat or even fall slightly. That prediction is significantly worse than its previous $600 million earnings expectation. Instead, Carnival reported an adjusted net loss of $770 million (65 cents per share) on $4.3 billion in revenue. Operating costs and expenses totaled $3.4 billion during the quarter, compared with costs of $1.6 billion in the third quarter of 2021.
But bookings improved by 15% to 84% compared to the previous quarter. That compares with 54% occupancy during the same time in 2021. As one of the world’s largest cruise liners Carnival Corporation owns and operates ships offering cruises to vacation destinations like North America, the United Kingdom, Germany, Southern Europe, South America, and the Asian Pacific. Through a subsidiary, the company also owns and operates hotels and lodges.
But despite government relaxation of pandemic protocols, the company is projecting fourth-quarter bookings below 2019 levels – at lower prices. Carnival’s news comes as cruise companies across the board struggle with massive debts incurred during pandemic lockdowns, made more expensive by rising interest rates. Last week, the cruise liner reported $1 billion in principal payments for 2022 and a total of $9 billion due by 2025.
Rival cruise stocks also took a hit after Carnival’s announcement. Royal Caribbean shares fell by 10% to less than $40, while Norwegian Cruise Line dropped 13%, down 46% this year. The cruise industry was among the first to be hit by the global pandemic, and it’s been reeling ever since. In March 2020, the Centers for Disease Control and Prevention issued a no-sail order for the industry that lasted until July.
Fortunately, Carnival’s stock rallied after the company posted strong earnings earlier this year. But the positive news was short-lived as analysts started slashing their price targets due to surging inflation and higher fuel prices. Additionally, Morgan Stanley warned that in a worst-case scenario, the company’s stock could fall to $0 per share if the economy falls into a recession.
Speaking about Carnival’s share price, M Science analyst Michael Erstad told Reuters while there have been other headwinds to building occupancy, like restricted protocols, he thinks inflation and consumer constraints are also having an impact on the industry. Meanwhile, Carnival has been heavily discounting and ramping up advertisements to attract passengers after a long pandemic-led interval.
