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Stocks  | May 12, 2020

Carnival (NYSE:CCL) recently plunged from a February 2020 high of $43.93 to a recent price of $14.21, after dipping as low as $7.90. and CCL stock isn’t the only loser. Royal Caribbean (NYSE:RCL) sank from a Feb. 2020 high of $116.87 to a current price of $39.92 after hitting a low of $19.25.

Let’s just say that the novel coronavirus sank the cruise industry.

Making matters even worse for the cruise stocks, Norwegian Cruise Line (NYSE:NCLH) said there’s “substantial doubt about the company’s ability to continue as a going concern,” adding that, “The company has experienced substantial impacts related to the emergence of the COVID-19 global pandemic including meaningful softness in near-term demand and elevated cancellations.”

It’s not as if that came as a big surprise, though.

With “stay at home” orders, docked ships, and travel restrictions in place, many of the major cruise lines are burning through cash. Plus, should we see another surge in virus cases around the world, health officials could extend travel restrictions further.

While I wouldn’t back up the truck to buy cruise stocks on that news, one of the standout ones to consider is Carnival. For one, it has a far more attractive balance sheet than that of Royal Caribbean as analysts have noted.

Two, Carnival stock has seen some great investments from the Saudis and insiders lately. And three, with plenty of patience, Carnival could revisit its $42 highs again once these troubled waters pass.

Top Reasons to Start Accumulating CCL Stock

The first reason is simple. Just days ago, Board member Randall Weisenburger bought 1.25 million shares at $8 a piece for a total of $10 million. He now owns a total of 1.375 million shares of the stock. This is the first insider transaction since the virus news sank the cruise industry. This follows news the Saudi’s Investment Trust disclosed an 8.2% stake in Carnival on April 6.

Secondly, UBS Securities analyst Robin Farley has noted Carnival is best suited to weather the downturn. “The company could survive for as long as 15 months without making any money.”

Additionally, CEO Arnold Donald appears bullish on the future, with futures bookings strong.

“It’s been devastating temporarily. Travel is going to return, travel and leisure, and when it does, we’ll return with it. Social gathering at some point will return, and when it does, people will want to cruise,” he said. “We’ve had substantial bookings. Bookings for 2021 are strong.”

Cruises Picking up Momentum for 2021

Granted, no one is sure when ships will be allowed to sail again, but bookings have turned higher.

“UBS wrote that cruise booking volume for 2021 was up 9% in the last 30 days compared with the same time last year,” says the Los Angeles Times’ contributor Hugo Martin. “Booking volume was even higher for trips to Asia and Alaska, UBS said, ‘so there is pent up demand for Asia travel next year.’”

Carnival has also noted it plans to “phase-in” cruises beginning in August 2020.

“The company said operations will resume with eight ships, Carnival Dream, Carnival Freedom and Carnival Vista from Galveston, Texas; Carnival Horizon, Carnival Magic and Carnival Sensation from Miami, Florida; and Carnival Breeze and Carnival Edison from Port Canaveral in Florida,” as noted by MarketWatch contributor Tomi Kilgore.

While news of resumption boosted CCL stock, it’ll be interesting to see if it actually happens. It all really depends on if “stay at home” and travel restrictions can be successfully lifted.

Sure, there’s plenty of great news from the Saudis, the insider buys, increased booking volumes, and hope Carnival will return to service by August, but a recovery won’t happen overnight. When it comes to cruise stocks, you need plenty of patience.

At the same time, if you want to make money as others remain fearful, CCL stock is a solid blood in the street opportunity. The best part – Carnival won’t go out of business any time soon.

There’s far too much demand for cruises. In fact, after being on about a dozen cruises over the years, it’s one of the best ways to vacation, in my opinion.  If Carnival can keep its head above water in these rough times, I strongly believe it can make a return to $40.

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