This goes for all of the major companies, including Royal Caribbean (NYSE:RCL), Carnival (NYSE:CCL), and Norwegian Cruise Line Holdings (NYSE:NCLH).
During recent market crash, CCL dropped from $51 to $8.49 4/3/2020, -83% and it might continue dropping. Is it a buying opportunity?
One group of people thinks it is a buying opportunity: "CCL Will Survive and Thrive Even Without a Bailout.
The company has a portfolio of brands that includes Holland America, Princess Cruises and Seabourn. It has a cruise line in the United Kingdom, Germany, Australia and Southern Europe. It attracts nearly 13 million guests each year. Carnival has a strong balance sheet. Its debt-equity ratio is 0.5 times. Still, its debt grew at a compounded annual growth rate of 1.6% since 2014. Back then, its net debt was $7.4 billion but it since rose to $9.3 billion. Higher capital expenditure hurt free cash flow. With the near-term FCF falling, the company could cut its dividend to preserve cash. The firm may cut expenses, reduce staff and refinance its debt at lower interest rates. This will not prevent a quarterly loss, but will ensure its long-term survival.
The company has a portfolio of brands that includes Holland America, Princess Cruises and Seabourn. It has a cruise line in the United Kingdom, Germany, Australia and Southern Europe. It attracts nearly 13 million guests each year. Carnival has a strong balance sheet. Its debt-equity ratio is 0.5 times. Still, its debt grew at a compounded annual growth rate of 1.6% since 2014. Back then, its net debt was $7.4 billion but it since rose to $9.3 billion. Higher capital expenditure hurt free cash flow. With the near-term FCF falling, the company could cut its dividend to preserve cash. The firm may cut expenses, reduce staff and refinance its debt at lower interest rates. This will not prevent a quarterly loss, but will ensure its long-term survival.
Another group of people recommended to stay away: Cruise lines aren’t going to be bailed out by the U.S. government. Their ships are registered under flags of convenience like Liberia and Bermuda.
CCL: Executive chairman Mickey Arison, whose father founded Carnival and also owns the Miami Heat basketball team, is listed as having a $5.6 billion fortune by Forbes. Even after selling 10 million Carnival shares in the middle of the decade, his family and related entities still held 24%.
While Carnival is ineligible for a bailout, Arison has offered to use ships as “floating hospitals” Carnival did this after hurricanes in 2005 and 2017. Arison is reportedly close to President Trump. In its most recent year, Carnival netted about $3 billion on revenue of about $20 billion. There is certainly an asset here worth saving. The ships could be mothballed, disinfected, and maintained as ready to sail after the crisis has passed.
But that would not save owners of common stock. Carnival spent over $2 billion on dividends and stock buybacks, much of it financed with new debt, over the last year. It also had a $5.5 billion capital budget, mostly on new ships. On March 17 Carnival said it would tap most of its $3 billion in remaining credit to bolster its cash position. The company had nearly $10 billion in debt as of November.
If Arison lets the stock continue to fall, to near zero, he may be able to take the company private, using debt to get it through the crisis. He could, in theory, sell the Miami Heat basketball team to finance a bid. But common stockholders look certain to be written off. Stay Away !!! What’s left of the Carnival story is a game for billionaires, not small investors.
My thoughts: no matter if CCL financially will be survived during the COVID19 pandemic or not, until the pandemic is ended and the vaccine is publicly released, there might be very few people dare to go on cruise. Therefore, it is not the bottom yet. Because of the shocking news of the massive virus spreading on the cruise ships and the death tolls, most people including myself might not go on the cruise for a couple of years. Cruise is a luxury thing that people can enjoy life without it. After the pandemic, for awhile, most people might choose to take airplane to the vacation places rather than on cruises. However, after a coupe of years, the 2020 pandemic becomes a history, people, of course, will go on cruise line again. If you can hold the Cruise stocks for two years(assuming it will not be bankrupted), I do think it is dirt heap.
I think If you want to gamble, you can spend a couple of hundreds dollars to buy a few call CCL options. After a couple of years, you might loss a couple of hundred dollars or you might gain thousands.
I think If you want to gamble, you can spend a couple of hundreds dollars to buy a few call CCL options. After a couple of years, you might loss a couple of hundred dollars or you might gain thousands.