By David Russell of OptionMonster
NEW YORK -- The bulls are piling into Carnival (CCL) as its shares try to hold a key support level.
OptionMonster's tracking systems detected the purchase of more than 11,000 September 37 calls yesterday, most of which priced for 75 cents. Volume was more than 40 times the previous open interest in the strike, showing that this is fresh buying.
These long calls lock in the price where shares can be bought in the cruise-ship operator, letting investors cheaply position for a rally. The contracts can also generate significant leverage but will expire worthless if the stock remains below $37 through mid-September.
Carnival shares attempted to rally early yesterday but rolled over along with the rest of the market and ended the session down 0.93% to $36.22. The stock has spent the last three weeks attempting to hold the same $36 level where it bounced in April.
Overall option volume in the name was almost 13 times greater than average yesterday, with calls accounting for a bullish 92% of the total.
Russell has no positions in CCL.
TheStreet Ratings team rates CARNIVAL CORP/PLC (USA) as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate CARNIVAL CORP/PLC (USA) (CCL) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 6.5%. Since the same quarter one year prior, revenues slightly increased by 4.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The current debt-to-equity ratio, 0.39, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.13 is very weak and demonstrates a lack of ability to pay short-term obligations.
- The gross profit margin for CARNIVAL CORP/PLC (USA) is currently lower than what is desirable, coming in at 29.42%. Regardless of CCL's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, CCL's net profit margin of 2.91% is significantly lower than the industry average.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, CARNIVAL CORP/PLC (USA)'s return on equity is below that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: CCL Ratings Report