Carnival Shares Rises on CEO's Cautious Optimism

Carnival Cruise's CEO says the company has funding to see it through until 2022 even without any revenue coming in.
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Carnival Cruise Line  (CCL) - Get Report reached a 52-week high Monday after the cruise line operator expressed guarded optimism about the future as the battered industry tries to emerge from the coronavirus pandemic.

Shares of the Miami company at last check rose 4% to $29.60; they've touched a 52-week high of $30.12. Royal Caribbean Cruise  (RCL) - Get Report was up nearly 5%, while Norwegian Cruse Line Holdings  (NCLH) - Get Report added 3.5%.

Carnival Chief Executive Arnold Donald said Sunday in an interview with the Financial Times that the company had funding to see it through until 2022 even without any revenue coming in. 

Carnival has also taken precautionary measures such as delaying new ships and cutting executive salaries and dividends

Donald added, however, that shrinking its fleet due to the pandemic will slow Carnival’s full recovery until 2023.

The company reported a wider-than expected fourth-quarter preliminary loss of $2.2 billion. On the bright side, it has more than $9 billion in cash and equivalents.

Carnival is currently running a limited number of sailings in Europe and Asia with some going to sea and returning without stopping in ports. 

The cruise industry was hammered by the coronavirus outbreak, as the disease spread rapidly among passengers and crew. Then, lockdowns and social-distancing requirements kept travelers at home.

On Friday, Truist analyst Patrick Scholes raised his price target on Carnival to $16 from $14 while affirming a sell rating on the shares.

Scholes that his conversations with executives at large travel agencies who examine data on future bookings and pricing highlight a "further reaffirmation" of pent-up demand, particularly for high-end cruises next year and beyond. 

The analyst said that the year-to-date sales through early March are still "deeply negative" relative to pre-COVID levels, but the initial demand statistics for 2022 "look encouraging".

Earlier this month, Macquarie analyst Paul Golding upgraded Carnival, Norwegian Cruise Line and Royal Caribbean to outperform from neutral. 

He told investors that "with Covid cases dropping and vaccine penetration rising, we think most negative catalysts are now in the rear-view mirror.”