CCL Stock: Is Carnival Stock A Buy Right Now? Here's What Earnings, Chart Show

CCL Stock: Is Carnival Stock A Buy Right Now? Here’s What Earnings, Chart Show


CCL stock rallied despite news that two passengers sharing a stateroom aboard a rival’s cruise ship, the Celebrity Millennium, had tested positive for the coronavirus. Carnival Cruise Lines (CCL) is the parent of nine cruise lines.


News of the positive tests had initially torpedoed all cruise line stocks. But Carnival and its U.K.-based sister Carnival (CUK), trading via ADRs, turned back up.

Rivals Norwegian Cruise Line (NCLH) and Royal Caribbean Group (RCL) continued a multiday downtrend.

The Celebrity Millennium sails for Royal Caribbean’s namesake cruise line.

CCL Stock And Its Rivals: Torpedoed By Royal Caribbean’s Bad News

The news came just as cruise lines are battling the CDC, state officials in Florida and Texas and lingering public wariness, while cruise lines attempt big reopenings of sailings from U.S. ports.

The Celebrity Millennium had departed on Saturday from St. Maarten in the Caribbean.

The positive test occurred at the end of the cruise, according to Royal Caribbean Group, wich is also parent of Celebrity Cruises. The couple are not showing symptoms of Covid-19, Royal Caribbean said. They are in isolation and being monitored by a medical team.

Royal Caribbean Performs Contact Tests

Royal Caribbean says officials are cross checking people whom the couple contacted. Those people are being tested. The cruise line says at the time of initial departure, all passengers and crew were vaccinated. All passengers were required to show proof of vaccination and of negative Covid-19 tests within 72 hours prior to that initial Saturday sailing from St. Maarten, the cruise line says.

“The situation demonstrates that our rigorous health and safety protocols work to protect our crew, guests and the communities we visit,” Royal Caribbean said in a release.

Royal Caribbean Group was down nearly 7% from Thursday through early trading Friday.

Norwegian cruise was down about 7% from Thursday through the start of trading on Friday.

Last Week’s Good News

The Royal Caribbean infection news followed word that Carnival Cruise Line will shove off in July with paying, vaccinated customers from the Port of Galveston.

Carnival says passengers must complete their vaccines at least 14 days prior to the start of the cruise and can provide proof of vaccination. Carnival Vista and Carnival Breeze will be the ships returning to sea operations.

Carnival says it is also aiming for a restart by Carnival Horizon from Miami. But Carnival apparently still needs a resolution of the disagreement between CDC rules requiring passenger vaccinations and Florida rules that bar a cruise line from requiring passengers to show proof of vaccination.

The pullback in CCL stock occurs a week and a half after Carnival hit its $30.73 buy point, but mired in weak metrics such as earnings per share. Departures from U.S. ports essentially ground to a halt in March 2020.

CCL Stock: Bullish Development

A resumption of departures from U.S. ports would be a bullish development for Carnival and the cruise industry.

The U.S. Centers for Disease Control and Prevention gave rival Royal Caribbean the green light to let its ship, Freedom of the Seas, conduct what will technically be a test voyage, employing CDC guidelines. That voyage will depart from Miami in late June.

But the opening, while limited to one ship in a rival’s fleet, had buoyed investors in Carnival and other cruise lines.

Freedom of the Seas will require all crew and passengers 17 years of age and older to be vaccinated against Covid-19. That will kick off test cruises prior to any revenue cruises.

CCL Stock Basks In Its Rival’s Good News

Ironically perhaps, the cruises potentially set up a clash with Florida Gov. Ron DeSantis. At his insistence, Florida bans requiring proof of vaccination.

DeSantis sued the CDC in April to force the agency to drop its safety requirements. The case has gone to mediation.

Carnival Owns These Cruise Lines

In another separate move, several U.S. cruise lines recently announced plans to resume passenger voyages between Seattle and Alaska.

Carnival owns Carnival Cruise Line, Holland America and Princess Cruises.

Tumultuous Year For CCL Stock Investors

Cruise lines lost billions of dollars while cruising has been on hold. Carnival, like its rivals, took on billions of dollars in debt to avoid sinking financially.

Carnival has threatened to move ships from U.S. ports over the CDC’s ongoing restrictions of cruise operations that start in the U.S.

The departure restrictions stem from the Covid-19 pandemic.

CCL Stock Continues To Pick Up Steam

Carnival stock is up 38% this year, after the cruise ship conglomerate in early March began to urge customers to resume bookings.

So, does all of this make Carnival stock a buy right now? Their last breakout prior to last week was from a cup-with-handle base Feb. 22.

CCL Stock: Shaping Up Its Finances

Carnival has used the pause in seagoing operations to improve its fundamentals. The cruise line has rid itself of at least 16 less-efficient ships.

In addition, Carnival slashed its monthly cash burn to $500 million as of the fourth quarter. That’s down from more than $700 million in the third quarter.

Still, long-term debt ballooned to $26.96 billion as of Nov. 30. It was $9.62 billion as of Aug. 31, 2018.

Fleets Morph Into Ghost Ships

Carnival’s frustrations with the ongoing ban on U.S. cruise departures stem from the fact that, industrywide, entire cruise ship fleets sit empty and forlorn. They are docked or moored, without a passenger onboard. Many formerly grand vacation vessels have morphed into virtual ghost ships.

And Carnival executives feel that the CDC is being more restrictive with their industry than with allied businesses in hotels and airlines.

Amid the prospect of better times, is this the time to buy CCL stock? Here’s what Carnival earnings and chart show.

Fundamentals For CCL Stock

CCL stock ranks a modest 13th out of 37 stocks in IBD’s Leisure-Services industry group, according to IBD’s Stock Checkup tool. The group itself ranks a 75 vs. 73 about two months ago, out of IBD’s 197 groups.

CCL stock has an IBD Composite Rating of 44. That means Carnival shares lag 56% of all stocks on a number of technical and fundamental factors, including price performance and earnings.

Generally, CAN SLIM investors consider only stocks with a score of 90 or higher on the 1-to-99 scale.

More Fundamental Analysis

CCL stock carries a low 9 for its Earnings Per Share Rating. The 9 rating is terrible but not surprising given the coronavirus pandemic’s impact on vacation cruising. It means that Carnival’s earnings per share growth has outperformed just 9% of all publicly traded companies.

Stocks with EPS Ratings of 80 or better have the best chance of success. Keep in mind, too, the company could rack up huge losses in 2021. The EPS Rating could plummet further this year.

The stock has an IBD SMR Rating (sales + profit margins + return on equity) of E. That shows that Carnival is in the bottom 20% of all publicly traded stocks when it comes to the composite profitability measurement.

The Cruise Line’s Technical Ratings Are Weak

When investors are looking for top stocks to buy, they want to see a stock shaping a proper chart pattern. IBD’s long-term research shows that certain chart patterns are the launchpads that kick off virtually all major stock moves.

In March 2017, CCL stock broke out from a flat base. But on Jan. 30, 2018, it began to downtrend. On some downturn days, volume was four times above average, a bearish sign.

In 2020, once news broke of an epidemic in China, CCL stock plunged from above 50 to a low of 7.80 over a year ago. Now it’s trading below 30.

It’s trading above its 200-day and 50-day moving averages.

Investors should consider stocks above their 50-day average.

Additional Technical Analysis On CCL Stock

CCL stock’s strong Relative Strength (RS) Rating of 79, down from 86 last month, of a possible 99. It is up from a moribund 16 late last year.

The best stocks tend to have an RS of 80 or better as they start a new climb. IBD’s proprietary RS Rating ranges from 1 (worst) to 99 (best), and measures a stock’s price performance in the past 12 months against all other stocks.

Still, the stock has an IBD Accumulation/Distribution Rating (A/D) of B on an A-E scale with A+ tops. Its rating is up from its D- about two months ago. Its B rating indicates more net buying than net selling by institutional investors such as mutual funds.

Big backing by funds helps stocks break out.

As of March 31, 1,146 mutual funds held the stock, according to data from MarketSmith. That’s up a shade from 1,095 mutual funds as of Sept. 30 but down from 1,156 as of June 30, 2020.

Bottom Line: Is CCL Stock A Buy?

Where does all of this leave CCL stock? The stock looks poised for a bon voyage once the coronavirus pandemic is truly tamed.

But the stock’s weakness in earnings per share and its Composite Rating mean that you can find better stocks.

Growth stock investors generally should focus on the best stocks in the stock market’s leading industry groups. Carnival does not meet that standard yet.

At the moment, CCL stock is not a buy.

Follow Paul Katzeff on Twitter at @IBD_PKatzeff for tips about retirement planning and active mutual fund managers who consistently outperform the market.


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