Cruise line Carnival (CCL) is getting tired of playing nice with the U.S. Centers for Disease Control & Prevention (CDC), which controls when cruise lines are allowed to cast off. Carnival is threatening 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. The CDC replaced its outright cruise ban in October with a set of safety actions that cruise operators must meet to be allowed to operate.
Carnival has halted operations through June 30, according to a news release by the cruise line. In that release, Carnival president Christine Duffy asked the CDC that “the cruise industry be treated on par with the approach being taken with other travel and tourism sectors, as well as U.S. society at large.”
Basically, Carnival is threatening to follow Royal Caribbean and Norwegian Cruise Line, which have redeployed ships to new home ports outside the U.S.
CCL Stock Continues To Pick Up Steam
Investors reacted by continuing their run-up of Carnival share price. Carnival stock is up 8% in the past three trading sessions.
Carnival stock is up 32% this year, after the cruise ship conglomerate in early March began to urge customers to resume bookings.
Does that make Carnival (CCL) stock a buy right now? For the moment, that ship may already have sailed.
Shares have zoomed 22% above their buy point of 24.48. The break out from a cup-with-handle base was Feb. 22.
Now that shares are extended, 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 stems 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 20th 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 22, up from 50 a month ago out of IBD’s 197 groups.
CCL stock has an IBD Composite Rating of 45, down 22 a month ago. That means Carnival shares lag 55% 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 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 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 2020. 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, Carnival stock plunged from above 50 to a low of 7.80 about a year ago. Now it’s trading around 30.
It’s trading above its 200- and its 50-day moving averages.
Investors should only consider stocks above their 50-day average.
Additional Technical Analysis On CCL Stock
CCL stock’s Relative Strength (RS) Rating of 87, 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 C on an A-E scale with A+ tops. Its rating is down from A- a month ago. It was C in the fall. That C rating indicates a neutral balance of net buying and sellling by institutional investors such as mutual funds.
Big backing by funds helps stocks break out.
As of Dec. 31, the stock was held by 1,126 mutual funds, according to data from MarketSmith. That’s up a shade from 1,111 mutual funds as of Sept. 30 but down from 1,173 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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