Is it time to buy Carnival Corporation stock?
cruise operator carnival society (NYSE:) The stock has seen a nice pullback since peaking around $31.46 on reopening momentum. The travel and leisure sector was an epicenter sector during the pandemic and saw a surge and subsequent sell-off as travel normalized with the acceleration of COVID-19 vaccinations. Stocks are hitting higher lows, indicating buyers are increasing support on pullbacks. However, it could also be the setting of a daily bearish flag if the trendline breaks. The company has launched numerous sell-off programs in the market to raise much-needed cash during the recovery. On August 13, 2021, 27 people tested positive for COVID-19 despite being vaccinated. Stocks were able to rebound after the news, which is a good sign that markets are trying to put COVID-19 in the rearview mirror as pent-up demand continues to spill over into 2022 bookings. Stocks continue to trade well below their pre-COVID levels, leaving more meat on the bone until the rise. Cautious investors looking for opportunistic pullbacks in this segment may consider adding exposure to Carnival shares.
Q2 2021 Business Update
On June 24, 2021, Carnival released its business update for the quarter ending June 2021. US GAAP net loss was (-$2.1 billion) and adjusted net loss was (-2 billion dollars). The Company ended the quarter with $9.3 billion in cash and short-term investments. This is sufficient liquidity to return to full cruise operations. Customer deposits increased sequentially during the quarter. Cash burn improved for forecasting and 42 vessels from eight of the nine brands have resumed or announced the resumption of guest operations by November 30, 2021, representing more than 50% of the company’s capacity. Booking volumes were 45% year over year (YoY). Cumulative early bookings for the whole of 2022 are ahead of the very strong 2019. Carnival CEO Arnold Donald commented:
“We are working aggressively on our way to returning our entire fleet to service by next spring. So far, we have announced that 42 vessels, representing more than half of our capacity, are to return to customer service. by the end of this fiscal year. . We are currently evaluating various deployment options with a focus on maximizing cash flow, while delivering an exceptional customer experience and serving the best interests of public health.”
Total customer deposits as of May 31, 2021 and February 28, 2021 were $2.5 billion and $2.2 billion, respectively.
Takeaways from the conference call
CEO Donald set the tone:
“We are evaluating additional deployment options throughout the fall and winter periods with a focus on maximizing future cash flow while delivering an excellent customer experience in a way that, of course, serves in the best interests of public health. Again, our highest responsibility, and therefore our top priority, is always compliance, protection of the environment, and the health, safety and well-being of our guests, people in the communities we touch and serve, and of course, our Carnival family, our team members on board and ashore. We continue to work on resuming operations also in Australia and Asia. And while we cannot predict the pace of the ramp-up to full fleet operations, we continue to expect full operations well before our important summer season next year. In the short term, we will be impacted by physical distancing requirements on some of our cruises, which limits our historically high occupancy rates. And also, in the short term, we will be impacted by restricted deployment options because not all 700 ports we visit are receiving guests yet. As more and more people receive vaccines as treatment progresses and the mitigation of the spread of the virus continues, the current restrictions will of course evolve as well, and we are confident that we can eventually navigate without these restrictions. Throughout this pause, we have proactively managed business resumption as an even stronger operating company. Our strategic decision to accelerate the release of 19 vessels has reduced our capacity growth to approximately 2.5% compounded annually from 2019 to 2025, compared to 4.5% pre-COVID. Additionally, we have opportunistically rebalanced our portfolio through vessel exits as well as the transfer of vessels and a change to our newbuild schedule, the combination of which will transfer 8,000 vessels from our continental European brands to the America’s favorite cruise ship, Carnival Cruise Line, to optimize the current environment, maximize cash generation and improve our return on invested capital. While overall fleet capacity growth is limited, we will benefit from an exciting slate of new vessels spread across our brands to capitalize on pent-up demand and generate even more excitement, excitement and demand around our restart plan. Almost every brand will soon have a new ship welcoming guests for the first time, starting with our namesake brand, Carnival, which will feature the new Mardi Gras.
CEO Donald said:
“I would like to thank David Bernstein and our entire finance team here for their very successful efforts to help us manage the balance sheet. As we reported in our press release this morning, the company has successfully refinanced a term loan of $2.8 billion and annual future interest savings of more than $120 million, and this is the first of many opportunistic refinancings we plan to undertake.”
He concluded :
“Agility has been a key strength over the past 15 months. We expect the environment to remain dynamic as our fleet deploys, while continuing to adapt to an ever-changing situation. We are therefore working hard to return our fleet to service as quickly as possible, while serving the best interests of public health. With the aggressive actions we have already taken, optimizing our portfolio and reducing capacity, we are well positioned to capitalize on pent-up demand and emerge a leaner and more efficient business, strengthening our position as global industry leader. We obtained enough cash to carry out our operations. And once we resume full operations, our cash flow will be the primary driver of returning to investment-grade credit over time, creating greater shareholder value.
CCL Opportunistic Withdrawal Price Levels
Using the rifle charts on the weekly and daily time frames provides a short-term view of the landscape for the CCL stock. The weekly Rifle chart has an edge or breakout as the 5-period moving average flattens near $23.42 Fibonacci level (fib). The 15-period MA drops to $24.47 as the channel tightens to prepare for a possible stochastic crossover breakdown or breakout on the weekly cross from the 5-period MA to the 15-period MA. The weekly upper Bollinger Bands (BB) lie at $33.06. The weekly weak market structure (MSL) buy triggered above $23.55. The Daily Rifle chart has compressed, as indicated by the inward compression of the Daily BBs. The daily 5- and 15-period MAs are fixed at $23.20 and $23.40, respectively. The daily stochastic has been in a mini reverse swing of the downward marching pups. This means that each time stocks try to rebound, they are pushed down, however, to higher lows. This will resolve when daily BB compression turns into expansion. The only question is the direction of price range expansion. Cautious investors can watch for opportunistic pullback levels at the $22.36, $21.35 fib, $20.52, $19.62, $18.98 fib, $17.25 fib level and the price level of $16.20. Keep an eye on the RCL and NCLH peers as these stocks tend to move in groups.