The bad news for Carnival Corp is that the stock (NYSE: CCL) keeps getting worse.
The Centers for Disease Control and Prevention investigated a Covid-19 epidemic aboard a Carnival cruise ship. This led to a loss of all positive price momentum. Bloomberg had warned about the company’s high debt load one week earlier.
Carnival stock dropped sharply after analysts raised concerns about weak sales and the increasing risk of economic troubles worldwide.
Morgan Stanley(NYSE: ) has joined the chorus to warn CCL stock by lowering its price target from $17 a $13 while maintaining an Underweight rating. Jamie Rollo, a Morgan Stanley analyst, cited three significant risks to Carnival investors: weak sales, rising economic instability, and high-interest costs.
This is just days after Bloomberg’s Lisa Lee classified the cruise-ship operator as a “zombie company.”
According to the article, “zombie companies” have no chance of making a profit but have large amounts of debt due to excessive central bank lending and easy credit. Lee says that “their time is running out” as interest rates rise and banks raise lending standards.
CCL stock is risky due to a weak balance sheet and the Covid-19 PR disaster. CCL stock is not recommended at the moment.
CCL Carnival Corp $9.91
A Closer Look at CCL Stock
Although the cruise industry has struggled with the effects, things are improving. New amenities and activities on board cruise ships have helped attract more passengers, including paddle boards and aqua parks.
Its business was severely affected by the pandemic. Due to the rapid spread of coronavirus worldwide, people were reluctant to travel, and cruise lines suffered a significant blow. Because cruises were at the epicenter of early outbreaks, the CDC took a tough stance against them.
Carnival Cruises was optimistic recently. According to Carnival Cruises, the cruise operator is now back in full force and operating with 23 ships.
CCL stock continued to fall after the CDC updated cruise ship cases. Covid-19 was found on the ship that arrived on May 3.
It could not have happened at a worse time. Carnival and other cruise lines had to borrow money to survive the shutdowns. These companies were eager for the CDC’s clearance to return to profitability.
Debt and profitability
Experts in the cruise industry are questioning the viability of the sector. Analysts are concerned that Carnival’s debt has risen to $36 billion. This year should have seen a reversal of the once-in-a-lifetime pandemic.
The CDC is currently investigating several cruise ships for coronavirus. These circumstances make it impossible for cruise companies to continue to thrive.
There has been more uncertainty since the invasion of Ukraine. In their first-quarter earnings report, Carnival stated that international passenger volumes were rising and saw a “material effect” on their business.
Carnival projects a loss in Q2 and for the whole of 2011. Cruise lines are raising the prices for all of their cruises to reverse their fortunes.
Although Caribbean cruises are still in high demand, there could be trouble for some segments of the vacation industry.
This is not good news considering its debt load. According to the latest February figures, Carnival’s debt load has increased from $9.7 billion to $36.23 billion.
Carnival will remain under pressure with increasing interest rates and a lack of income.
CCL Stock Is Too Risky Right Now
Although the pandemic is now in the background, it isn’t going away. This disease remains in many parts of the world. However, cruise stocks entered the year in high spirits. This feeling is fading for many cruise companies, with CCL being one of the most significant casualties.
Carnival is facing severe financial difficulties due to the disappearance of easy credit. It is time to get rid of this one if you own it.