Carnival’s Cruise Sinks Toward $0

Carnival, one of the world’s largest cruise companies, was hit hard by the COVID-19 pandemic, as was much of the travel industry. Recent financial results show it will be slow to recover, particularly compared to 2019. The spread of disease in general on cruise lines predates the pandemic and will almost certainly remain. One analyst has said that the company will not recover at any meaningful level and that its shares could drop to $0.

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Cruise lines, already Petri dishes for communicable diseases, have been riskier to travelers than vacations that involved planes. People on ships live in close quarters. Respiratory and GI bugs showed up with too much regularity for some travelers. The spread of COVID-19 was also a problem at the start of the pandemic. Cruise lines shut down, as did airlines.

Airline traffic recovered and the rush to fly moved back to pre-pandemic levels, particularly during holidays. Flying has become so popular that carriers can barely keep up with the demand. Poor service due to this has not been a deterrent to travelers.

After Carnival reported earnings, its stock plunged to levels Barron’s said were the lowest since 1992. The company lost $770 million. Carnival said it expected to lose money in the fourth quarter. It also said revenue in Q3 was better than in Q2. Comparisons to the same period last year do not mean much since the spread of COVID-19 was such a large issue. And Carnival sold stock to raise $1.15 billion. The third quarter results show that may not be enough of an addition to the balance sheet.

While comparisons to 2019 don’t seem germane, Carnival did say it was moving in the direction of pre-pandemic passenger levels. However, even if worry about the spread of COVID-19 has started to tail off, Carnival has been hit by higher costs. CNBC reported the company “revealed higher costs associated with inflation, supply chain disruptions and the maintenance of health and safety protocols.”

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The greatest sign of Carnival’s distress is that four and a half years ago the stock traded at $70. Today that has dropped to $7. $0 is not far off.