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🎤 Winvesta Speaks
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🚢 Carnival Corporation: Impacted By Delta Force?
Shares of cruise operator Carnival Corporation (CCL) dropped 10% this week. The stock had risen to as much as $31.4 early June in anticipation of a complete revival of operations. However, the Delta variant of the Coronavirus is causing some serious headwinds that could unravel the plans. (Tweet This)
Covid Drops Anchor
As Covid-19 spread last year, cruise lines across the board were impacted early on simply due to the fact that the infection could spread easily within the self-contained environment of a ship. In February 2020, the British frigate Diamond Princess had a major outbreak and the ship was quarantined for a month in Japan. 700+ people were infected and 14 died.
Many more outbreaks were reported across other vessels. Governments around the world ordered cruise companies to halt operations and the impact was devastating on the luxury cruise industry. Even as the US Congress approved the $2T relief package to shore up the economy, it excluded companies that are not organized under US laws.
The protagonist of today’s story, Carnival Corporation, is registered in Panama, and England, and Wales. And as such was shut out of any relief. The company dug into its own reserves to remain afloat. Carnival drew down its $3B revolving credit line, resulting in a downgrade of its debt rating. It also announced an issue of $1.25B in stock and $4.75B in notes which will be due in 2023.
All of these actions meant one thing. The share price had nosedived 85% between Jan-Apr 2020. After a near-total shutdown and much lobbying with the CDC and the White House, it was agreed the no-sail ban would be lifted on November 1.
Icebergs Of Another Kind!
Carnival’s Q2 update had projected optimism. Pandemic fatigue and increased vaccination coverage meant people’s wanderlust was being fanned.
Key Stats:
- Booking volumes for all future cruises during Q2 2021 were up 45% QoQ
- Cumulative advance bookings for full-year 2022 are ahead of those in 2019
- Cash at the end of Q2 stood at $9.3B, sufficient to resume full cruise operations
- Net loss of $2.1B
So as to avoid any missteps, Carnival has set up a standard operating procedure to keep Covid infections on its ships at bay. 95% of the crew and guests are mandated to be fully vaccinated; protocols such as wearing masks and ad hoc testing will be in place for the unvaccinated.
Be that as it may, the Delta variant has played spoilsport. For the two weeks ending July 3rd, this variant accounted for more than half the cases in the US. Fellow cruise operator Royal Caribbean reported two guests onboard its Celebrity Millennium ship tested positive for Covid-19 and were in isolation. That was enough for jitters to transform into shivers.
The cruise industry was one of the last sectors that have been allowed to resume operations. While Carnival and its brethren try to figure out their operations in these uncharted waters, there’s no certainty to any plans it seems. The ships may start sailing again, but there seem to be multiple icebergs in their paths that are making it a challenging voyage!
Market Reaction
CCL ended at $23.72, down 1.5%. The stock declined for the fourth day in a row.
Company Snapshot 📈
CCL $21.72 -0.36 (-1.50%)
Analyst Ratings (19 Analysts) BUY 37% HOLD 42% SELL 21%
Newsworthy 📰
Change: Online thrift store Poshmark CEO sees fashion shift as consumer purge closets (POSH -0.23%)
Strong Guidance: Levi Strauss forecasts upbeat full year as apparel demand bounces back (LEVI -0.14%)
Review: Walmart’s Black senior managers give the company low marks, report says (WMT -0.03%)
Later Today 🕒
- AZZ Inc. Earnings (AZZ)
- Greenbrier Companies Inc. Earnings (GBX)
- Oramed Pharmaceuticals Inc. (ORMP)
- 7:30 PM IST: Wholesale Inventories
Fun Fact of The Day 🌞
The curved arrow in Amazon’s logo is from A to Z is to show that it sells products from A to Z in almost every product category
