Should you buy Carnival shares before they go up?

Carnival (NYSE: CCL) (NYSE: CUK) shares fell 57% in 2020 as the coronavirus pandemic halted crossings around the world. While managing the pandemic, the company has spent hundreds of millions of dollars a month to maintain ships and cover its expenses, and it has raised $ 19 billion through various transactions to help weather the economic storm it is facing. find. Carnival’s Costa and AIDA-branded vessels have resumed limited operations in recent months, then shut down again as coronavirus cases increased in their European domestic markets.

There is good news on the horizon. Countries are starting to immunize their citizens using recently approved COVID-19 vaccines. And the Centers for Disease Control and Prevention (CDC) last fall released a framework for the conditional navigation order – guidelines for returning ships and their passengers to service.

As the situation improves, is it time to buy Carnival shares? Let’s take a closer look.

Vaccinations and last order from CDC

Currently, government regulatory agencies have granted emergency clearance Pfizer and Modern vaccines in the United States, the European Union and several other countries. Mass vaccinations are key to slowing the spread of the virus and helping convince the general public that it is safe to move freely again. This is good news for Carnival. The latest CDC order is also good news. It opens the door to cruising potential in the near future. This is an improvement over the CDC’s No Sail Order, which was released last spring.

Carnival management, in a fourth quarter earnings conference call, said the cruise line has yet to set a date for test cruises – a requirement under CDC’s new order . Test cruises involve sailing with volunteer passengers to confirm the effectiveness of the new health and safety measures on board the ship. Carnival has started bringing ships back to the United States, a critical step before launching a test. And Carnival has said it is now awaiting advice from the CDC on the timing of those tests.

Meanwhile, Carnival has prepared to withstand the worst-case scenario. CEO Arnold W. Donald said the company had $ 9.5 billion in cash and could sustain itself this year even in “a revenue-less environment.”

Carnival has also made efforts that will help its profits in the future. The company has stepped up the optimization of its fleet with a plan to sell 19 vessels. It has already eliminated 15. These vessels only represented 3% of operating profit in 2019. The move will reduce overall unit costs by 2% and unit fuel costs by 1%. The company has also delayed delivery of some newer ships.

Carnival said he hopes to have all of his remaining ships in service by the end of 2021. Of course, that will depend on the pandemic. If vaccination efforts take longer than expected and the crisis persists, Carnival may not meet that goal.

Takeaway for investors

So what does this mean for investors? It’s too early to say if Carnival will actually bring all of its ships back to sea this year. But even if it doesn’t, I think Carnival’s rebound is only a matter of time.

Company management anticipates Carnival will benefit from pent-up demand. Carnival said cumulative advanced bookings for the first half of 2022 exceeded those for the same period in 2019. Another positive sign: About 60% of bookings made in the last quarter for FY2021 crossings were new reservations and non-reservations of canceled cruises. This shows that people don’t book cruises just to use prepaid vouchers.

However, the carnival remains a stock at risk because it is not known when the coronavirus pandemic will subside and therefore when the ships will leave. If things improve quickly, Carnival shares could rebound this year. Otherwise, investors will have to be patient. We will also have to hope that Carnival can continue to manage its cash levels and control the rates of cash consumption. These are key points to watch for in future earnings reports.

So, yes, buying Carnival shares before they come up is a good idea. But buy them now? This is only a good idea if you are an aggressive investor, able to handle a lot of risk and willing to be a bit patient.