Does Near-Return Of Cruising Make Carnival Stock A Buy Right Now? Here’s What Earnings, Charts Show

Cruising is almost back, and CCL stock is edging up. Carnival (CCL) stock rose in response to news that the U.S. Centers for Disease Control & Prevention (CDC) is readying to let the cruise companies cast off from their year-plus freeze on voyages.




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CCL shares rose after the CDC dramatically simplified its requirements for cruise lines to resume high-seas operations.

Mainly, the CDC said cruise lines will not have to go through the expensive and time-consuming test cruises previously required by the health watchdog, if they instead can show that 95% of a ship’s passengers and 98% of its crew have been fully vaccinated against Covid-19.

The CDC said ships could start steaming again under the new guidelines by mid-July.

CCL Stock Investors Savor Start Of Voyages

The CDC action was a climax to to a tumultuous year for cruise lines and their key regulator. Cruise lines lost billions of dollars in the past year. Carnival, like its rivals, took on billions of dollars in debt to avoid sinking beneath the waves. And the CDC faced a lawsuit over what the state of Florida called the agency’s “arbitrary and capricious” refusal to end its conditional sail order.

Carnival had even 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.

Carnival president Christine Duffy had asked the CDC to treat the cruise industry on a par with the other travel and tourism sectors, as well as U.S. society at large.

CCL Stock Continues To Pick Up Steam

Carnival stock is up 26% this year, after the cruise ship conglomerate in early March began to urge customers to resume bookings.

So, does all of this make Carnival (CCL) stock a buy right now? For the moment, that ship may already have sailed.

On the one hand, shares have zoomed 15% above their buy point of 24.48. The break out from a cup-with-handle base was Feb. 22.

Now that shares are extended in the high 20s, you’ll have to wait for the stock to form a new base to find a new optimal buying point.

Still, if this breakout continues a while but then shares pull back to their 10-week moving average, that could offer a secondary buy point.

CCL Stock Starts To Shape Up: Holland America Ships Out

One thing that sparked renewed interest in Carnival was that Carnival-owned Holland America (HAL) said early in March that it is now booking cruises from September 2022 through April 2023 from piers in Asia, Australia and New Zealand for a variety of exotic ports of call.

Meanwhile, Carnival has used the pause in seagoing operations to improve its fundamentals. The cruise line has rid itself of 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 cruiseship fleets sit empty and forlorn. They are docked or moored, without a passenger onboard. Formerly grand vacation vessels have morphed into virtual ghost ships.

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

CCL Stock: What’s In The Carnival Fleet

Carnival owns nine cruise lines, including its namesake Carnival Cruise Line as well as marquee lines Princess Cruises, Holland America Line and Cunard.

The combined fleets consist of more than 100 ships. However, amid the coronavirus pandemic cruise freeze, the company is getting rid of less efficient ships. Carnival is focusing on ships with upgraded features.

Carnival is incorporated in Panama. Its operational base is in Miami. CCL stock is dual-listed on the New York and London stock exchanges. The London stock trades in the U.S. as an ADR CUK.

The company was founded in 1972. It lays claim to the title of world’s largest leisure travel company. It is also the world’s largest cruise company, carrying nearly 45% of global cruise passengers.

Fundamentals For CCL Stock

CCL stock ranks a modest 18th out of 37 stocks in IBD’s Leisure-Services industry group, according to IBD’s Stock Checkup tool. The group itself ranks a so-so 24, up from 50 two months ago out of IBD’s 197 groups.

CCL stock has an IBD Composite Rating of 47. That means Carnival shares lag 53% 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 sinks to a low 10 for its Earnings Per Share Rating. The 10 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 10% of all publicly traded companies in earnings.

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.

CCL stock’s previous breakout was in 2017. In March of that year it 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 about a year ago. Now it’s trading around 28.

It’s trading above its 200-day moving average and finding support at its 50-day line.

Investors should only consider stocks above their 50-day average.

Additional Technical Analysis On CCL Stock

CCL stock’s Relative Strength (RS) Rating of 89, up from a moribund 16 late last year. It’s above the 80 minimum investors look for.

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), measures a stock’s price performance in the last 12 months against all other stocks.

Still, the stock has an IBD Accumulation/Distribution Rating (A/D) of D on an A-E scale with A tops. Its rating is down from C a month ago. It was also C in the fall. That C rating indicates a neutral balance of net buying and selling by institutional investors such as mutual funds.

Big backing by funds helps stocks break out.

As of March 31, the stock was held by 1,147 mutual funds, according to data from MarketSmith. That’s up a shade from 1,106 mutual funds as of Sept. 30 but down from 1,168 as of June 30.

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.

Maybe shares will retreat into a new base once the current euphoria abates. That could set up a new buy point.

Meanwhile, 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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