Carnival: Restrictions Ending Are A Big Positive
- Carnival is priced for a restrictive Covid environment with the stock at $9.
- Canada and China are starting to remove Covid restrictions setting the cruise line for a full recovery in 2023.
- The stock remains too cheap at $9 with full earnings power of $2.50 to $3.00 a share once stripping out $1+ billion in additional interest expenses.
- This idea was discussed in more depth with members of my private investing community, Out Fox The Street. Learn More »
The only part of the puzzle holding Carnival Corp. (NYSE:CCL) and the cruise line sector back from a full recovery were some lingering Covid restrictions. The sector got extremely good news from a couple of very restrictive areas on Monday. My investment thesis remains ultra Bullish on the stock due to a more than full recovery in the sector ongoing while the stock trades at the recent lows.
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Update - Sept. 30
Carnival is down 20% after the cruise line reported relatively weak FQ3'22 results, but oddly the market is ignoring the strong commentary on 2023 bookings. The sell off today is unwarranted.
-During our third quarter our business continued its positive trajectory, achieving over $300 million of adjusted EBITDA and reaching nearly 90% occupancy on our August sailings. We are continuing to close the gap to 2019 as we progress through the year, building occupancy on higher capacity and lower unit costs.
-Cumulative advance bookings for full year 2023 are slightly above the historical average and at considerably higher prices, as compared to 2019 sailings, normalized for FCCs.