#5 - Carnival Cruise Lines (NYSE:CCL)
Year-to-Date Loss: 77%
I never realized the “anti-cruise” crowd could be so vocal. But ever since the coronavirus broke out on two of Carnival Cruise Lines (NYSE:CCL) ships, consumers who have never taken a cruise are taking their victory lap. And joining them is the crowd who are vowing never to cruise again.
The financial problem for Carnival is equally as important as its public relations challenge. The company’s net debt is currently over 96% of the company’s current value. However, that same debt is less than 25% of its total assets. But when you consider that the bulk of the company’s assets are tied up in their ships, it’s hard to get a clear picture.
Undoubtedly, the company will have to suspend or significantly cut its dividend. And considering the company will probably be a recipient of some form of government stimulus, share buybacks will be discontinued. That money can help offset the company’s decline in revenue. But the real problem is nobody knows how much revenue the company could have to replace.
Am I picking on CCL at the expense of other cruise lines? Perhaps. They all face difficult math. But Carnival’s name is associated with the coronavirus in a very specific way. Is that fair? No, but life is frequently not fair. How the company responds to the public relations fallout will be every bit as important as how they navigate the financial side.
However, with every ship from every cruise line currently in port for the foreseeable future, there is no reason to own Carnival stock right now.
About Carnival Co. &
Carnival Corporation & plc engages in the provision of leisure travel services in North America, Australia, Europe, Asia, and internationally. The company operates through four segments: NAA Cruise Operations, Europe Cruise Operations, Cruise Support, and Tour and Other. It operates port destinations, private islands, and a solar park, as well as owns and operates hotels, lodges, glass-domed railcars, and motor coaches.
Read More - Current Price
- $24.90
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 14 Buy Ratings, 2 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $23.78 (4.5% Downside)
On the one hand, people say the sector has been here before. In fact, twice in the last 20 years, the industry has dealt with major events that have damaged consumer confidence, if not their disposable income.
And in both cases, the industry has come back stronger than before. This time it feels different. In fact, the coronavirus feels like it’s making a direct assault on the industry itself. But as difficult as it to see, the economy will come back.
In the meantime, the industry will almost certainly be kept afloat by some form of government stimulus. As unpalatable as that may seem, this is a sector that has become too important to fail.
But when it does, some companies will be in a far better position than others. And that’s why we wanted to show you these companies that have some challenges even before the coronavirus. That will make it harder for them to become profitable any time soon.
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