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CCL Action: Don’t Look Now, But Carnival Is An Attractive Option


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With regard to cruise ship stocks, Carnival (NYSE:CCA) stock has never been my favorite. I’m sure the ships are just lovely and people have a great time on vacation. But when Covid-19 hit in 2020 and I went bottom fishing for a good buy on cruise stocks, Royal Caribbean Cruises (NYSE:RLC) has established itself as a best buy.

And for now, it pays off. After cruise stocks fell in March 2020, RCL recouped the most profits, rising around 86% on its recovery. Norwegian cruise lines (NYSE:NCLH) is in second place with a gain of 40%, and Carnival brings up the rear with a gain of around 20%. When I cashed in my RCL shares in August 2021, I made a gain of around 130%.

But now there are new variables at play. And I’m starting to think that CCL’s stock might now be the best cruising game for 2022.

Listen to me.

First, to invest in cruise stocks, you have to believe in the company – even if you have no interest in cruising. Before the pandemic hit, the Cruise Lines International Association said the number of passengers who took cruises around the world rose from 17.8 million in 2009 to 30 million in 2019.

Cruising is hugely popular, especially with the Gen X crowd who have a lot of cash to spend on cruises. And they have a lot of incentives to get out of their homes after two years of confinement.

I am therefore convinced that the cruise will come back in force.

Now, let’s take a look at our three cruising stocks. Although RCL has the best recovery since the start of the pandemic and CCL’s stock is the worst, all three names are still badly damaged. Royal Caribbean remains at 54% of its pre-pandemic level. NCLH is 72% off and Carnival’s stock is about 74% off its pre-pandemic peak.

This tells me that Carnival has the most remaining upside of the three cruise stocks.

And finally, there is an additional reason to be optimistic. Carnival successfully launched its Carnival Splendor ship from the Port of Seattle earlier this month. It’s notable because it makes Carnival the first major cruise line to put its entire fleet of ships back at sea since the pandemic began.

It is an exploit. And it’s also profitable, because it’s only by making reservations and taking cruises that cruise lines can make money. And Carnival is now in the best shape of the major cruise lines to do so, as all of its ships are once again in the water.

Now, I don’t think Carnival will shoot any higher just yet. There’s a lot of pressure on equities in general, and rising inflation and interest rates mean some people will have less money to spend on cruise vacations.

But I am cautiously optimistic that the CCL stock is now set up for a nice little upside. And I think it will outperform other cruise stocks over the next year.

At the date of publication, Patrick Sanders held (neither directly nor indirectly) any other position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

Patrick Sanders is a freelance writer and editor in Maryland, and from 2015 to 2019 he led the investment advice section at US News & World Report. Follow him on Twitter at @1patricksanders.



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