Stocks to sell

Carnival Stock Continues to Carry Weight of the ‘Unwanted’ Passenger

If you think Carnival (NYSE:CCL) and CCL stock is a good bet at almost $24, you might want to think again. Covid-19 is still very much still an “unwanted passenger” on its cruise ships. As a result, a resumption to pre-pandemic cruising — as well as improvements in the CCL stock price — seem like they’re far in the distance.

While I believe the cruise industry will return to normal at some point, now doesn’t appear to be that time. 

Here’s why.

Each New Wave Roils CCL Stock

A recent story appeared in Jim Walker’s Cruise Law News detailing the death of a 77-year-old woman who took a Carnival cruise with her family, leaving Galveston, Texas on July 31. 

Sailing on the Carnival Vista to several ports in the Caribbean, Marilyn Tackett became ill while on a port visit in Belize. The ship doctor gave the retired Sunday school teacher a Covid-19 test. It was positive. Tackett was transferred to a Belize hospital. Eventually, she was sent by air ambulance to Oklahoma, where she died while on a ventilator on Aug. 14. 

But here’s the thing. Tackett was fully vaccinated. 

And, yet, she still got Covid and died. It’s hard not to feel for the entire family. However, it shows what risks are involved in taking a cruise at this point, vaccinated or not. 

According to Cruise Law News, 26 crew and one passenger (Tackett) on the Carnival Vista tested positive for Covid-19. Further, something like 27 cruise ships have reported cases of Covid-19. The publication also has reported that a Carnival chief engineer died of Covid-19 after working for the company for more than 34 years with nary a mention from the company.

As my InvestorPlace colleague, Larry Ramer, recently wrote, cruise lines may again face no-sail bans due to the surge in cases from the Delta variant. 

I joke with friends that in two or three years, we will be saying, “Oh, we’re in the 55th wave. Remember when we thought three or four waves was too much?”

Covid-19 is not going away. Cruise lines were already giant Petri dishes. This ratchets up the health risks of cruising. For this reason, it appears that the near-term health of cruise line stocks, Carnival included, is not good.

What About the Experience?

Let’s assume for a second that Carnival was able to ensure that no one on its ships could be infected with Covid-19. But, of course, it’s impossible to make this guarantee but play along.

The Motley Fool’s Rich Smith recently highlighted the fact that cruising isn’t enjoyable these days. You don’t have to tell the passengers of the Carnival Vista that. 

“[P]arents of unvaccinated children under 12 years of age say that there is ‘nothing for the kids to do at all, besides the pool’ and that kids couldn’t get off the ship when it visited ports,” Smith wrote on Aug. 19. 

“Carnival apparently warned passengers prior to boarding that this would be the case, but this message got lost in the fine print, and has proved to make the cruising experience less pleasurable than it once was.”

Well, that last sentence is debatable, but I think you understand what I’m getting at. 

How will Carnival maintain a balance between safety and a quality cruising experience (another oxymoron) if Covid-19 sticks around and becomes a part of daily life?

Every little action on cruise ships will be under a microscope in the weeks and months ahead. The fact that they don’t pay U.S. taxes will encourage health authorities in this country to apply very stringent rules on cruise ships. The fact people are dying as a result only makes it worse. 

From an investment perspective, buying CCL stock at $23.50 is the equivalent of flying blind. You don’t have enough information to make an informed decision.

The Bottom Line

In June, I myself was still blissfully ignorant of the coming tsunami caused by the Delta variant, which first appeared in India last December. 

“[C]ome the end of July, the cruise operator’s new ship, Mardi Gras, will sail from Port Canaveral on a seven-day Caribbean cruise,” I wrote on June 28. 

“It’s about time.

“Two exchange-traded funds have launched since the beginning of May for those who believe cruising will completely come back along with the rest of the travel industry.”

Now, two months later, I’m anything but confident cruising will get back to normal in 2022, perhaps even later. One of those ETFs, Tidal ETF Trust – SonicShares Airlines, Hotels, Cruise Lines ETF (NYSEARCA:TRYP), is down 7.4% while it’s number 10 holding, CCL stock, is down 10.3%. 

In May, I suggested that if you could buy some CCL stock in the low $20s, you should. Given what we now know, I definitely need to update that recommendation. 

Today, if you can buy in the mid-teens, that’s a much safer entry point than $23.50 as I write this. However, If you’re a risk-averse investor, CCL should not be on your watchlist at this point. 

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.