Carnival Cruises To An Unattractive Rating For September

Carnival Corp is the largest cruise-based vacation company in the world. While it doesn’t have the biggest ships (that honor goes to Royal Caribbean RCL ) or even the highest stock prices, historically they’ve taken in more than enough revenue that losing out on those titles hasn’t stung too much.

And then the 2020 pandemic hit, and suddenly, being cooped up on a boat with thousands of other people wasn’t such a great idea.

Whether you view it as a viral cesspool or an excuse to quarantine in style, the fact of the matter is that cruises are no longer the safe, relaxing vacation they were meant to be.

Unfortunately for Carnival, that hit straight in the pocketbook.

Cutting Assets and Raising Capital

To their credit, Carnival took the responsible route in the face of impending doom. Soon into the pandemic, they started cutting operational costs and capital expenditures to stem the bleeding. At the same time, they worked hard to raise over $10 billion in financing by selling off a few assets in addition to $6 billion in stock and debt less than two months in.

More recently, Carnival updated its plans to trim its fleet to the bare necessities. Rather than scrapping or selling just 13 of its ships, as the company announced in July, Carnival is docking at least 18 different liners by the end of 2020’s fiscal year – primarily aging or high-maintenance ships that cost more to care for overall. Still, this reduces Carnival’s guest capacity by about 12% in an effort to become a “leaner, more efficient” company.

Sadly for the beleaguered cruise liner, this drastic slashing isn’t enough to keep the company afloat. Shares dropped Tuesday on the announcement that the company is dropping $1 billion in a new stock offering in an attempt to raise emergency capital. The funds will serve to boost their abysmal earnings and pay for general corporate expenses.

What Does This Have to Do with You?

Only time will tell whether these drastic efforts to buoy Carnival’s sinking prospects will have their intended long-term effects. For a company that may not see new organic revenue until early November, or even as late as 2021, these radical steps are a last-ditch recourse to a problem with no easy solution.

While we can’t predict when – or if – Carnival will ever set sail again, we can tell you a little more about the internal financial metrics of the company. Qai’s deep learning algorithms specialize in trawling stock data for the latest data to provide you, our savvy investors, with an informed recommendation on whether a particular stock is a wise investment.

Without further ado, let’s see what the numbers say about the month of September.

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Carnival Corp & Plc (CCL)

Carnival slammed down a whopping 10.76% on Tuesday, closing the day at $15.93 on a rather impressive volume of 80.1 million shares. This brings the stock to 68.6% down for the year, continuing the company’s six-month trend of shedding market cap on top of everything else.

Thankfully, the company’s other financial metrics don’t leave the same negative impression as Tuesday’s stock price (though 2020 isn’t over yet).

For instance, Carnival reported a revenue of $20.8 billion in the last fiscal year, a healthy increase over their $17.5 billion in revenue in 2017. Their operating income increased as well, albeit by a smaller increment: up to $3.28 billion from $3.24 billion three years ago. 

The company’s EPS has seen a significant boost in the same time frame, from $3.59 to $4.32, alongside a slight increase in their ROE from 11% to 12%.

While none of these metrics are truly abysmal, they’re nowhere near where a large cruise liner company wants to be heading into the fourth quarter of the year. And yet, with such impressively low gains – and depressed stock prices – there’s nowhere for the company to go but up: Carnival’s forward 12-month revenue is expected to grow by over 25%.

So, What’s the Verdict?

All of these numbers are nice to know, but what do they actually mean?

Pulling from this data, as well as the company’s historical performance, current price, and future prospects, our AI has crunched the numbers and come back with an answer: nothing good. Based on our internal ratings system, Carnival has earned itself a poor report card, with a B in Technical, D in Momentum Volatility and Quality Value, and an F in Growth.

The company has nowhere to go – ironic for an organization with so many boats – and no way to raise capital quickly outside of diluting shareholder stock and selling off its debts. None of this looks to change anytime soon; and even when cruise lines reopen to the public once more, they will be at reduced capacity and increased costs for the sake of safety for months or even years to come.

As a result, our AI has no choice but to grade Carnival as an Unattractive stock for the month of September.  

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