Carnival shares set to slump despite smaller-than-expected losses

• Carnival Corp shares slide despite recording smaller-than-expected losses
• The cruise operator hopes to bounce back from Covid-19 in 2021, but rough seas lie ahead
• Broader US market continues to climb, with S&P 500 bolstered by hopes of US stimulus deal

Carnival shares continue to come under pressure due to investors growing increasingly concerned about the viability of the travel industry amid rising coronavirus cases and the threat of tighter restrictions aimed at curbing the spread of the virus.

As such, the cruise operator has seen its share price fall for the second consecutive day, despite reporting smaller-than-expected quarterly losses and an improvement in advanced bookings for 2021, reflecting ongoing demand for cruising holidays.

‘We have accelerated the sale of less efficient ships, enabling us to capitalize on pent up demand on reduced capacity and structurally lower our cost base, while retaining our most cash generating assets,’ Carnival Corporation president and CEO Arnold said.

‘We are taking aggressive actions managing the balance sheet and reducing capacity to position us to weather this disruption and also emerge a leaner, more efficient company, reinforcing our industry leading position.’

Carnival is trading more than 1.5% lower at $15.44 per share at the time of publication, with the stock down 70% year-to-date.

Promising signs, but rough seas ahead for Carnival

Carnival was forced to pause its guest cruise operations in mid-March due to the coronavirus pandemic. However, the company was able to resume operations in September, albeit at a reduced capacity, with successful voyages from two of its Italian Costa Cruises fleet, Costa Deliziosa and Costa Diadema.

The cruise operator is hoping it can bounce back from the pandemic next summer, with total customer deposits sitting at $2.4 billion as of 31 August, compared with $2.9 billion the company recorded a year prior. It is worth noting, however, that the majority of that figure has come from credits given by Carnival for cancelled trips this year.

‘We have come full circle from initiating a suspension in the early days of the pandemic, to transitioning the fleet into a pause status, right sizing our organization and, now, embarking on the phased resumption of guest operations, underway in two of our world leading cruise brands, Costa in Italy and AIDA in Germany,’ Donald said.

Carnival Q3 results: key figures

Despite the cruise operator’s optimistic outlook for next year, the company reported a third quarter (Q3) net loss of $2.86 billion, compared with a profit of $1.78 billion over the same period a year ago.

Carnival also saw Q3 revenues take a major tumble, falling to just $31 million, down from the $6.53 billion a year prior.

On a per share basis, the company lost $2.19, a cent less than analysts’ expectations, according to IBES data from Refinitiv.

S&P 500: technical analysis

We have seen several days of gains for the S&P 500, bolstered by hopes of a US stimulus deal, according to Chris Beauchamp.

‘Having cleared 3448 the next target is the September record high,’ he added. ‘Some near-term weakness may find support towards 3448 and then 3400.’

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