Carnival Cruises - Too Big to Fail and a Generational Buy Oppo
Covid and the broader financial market freakout has decimated the "premier" Walmart brand of cruising. But at the same time it is essentially too big to fail. That’s why I still see it as a rebound play despite the ongoing pandemic and omicron variant.
It, along with Royal Caribbean and Norwegian Cruise Line simply define the industry. The three companies collectively account for $52.96 billion of the $53.42 billion in market capitalization within the cruise line sector.
Carnival is the largest and most important player in the industry.
IGNORE THE BEARISH TAKE AND INSTEAD BUY AND FORGET
The bear thesis against Carnival relates to the ongoing pandemic. It has been a very trying period for cruise ship operators. That long, trying journey continues. In fact, at the end of 2021 the CDC increased its travel warning for cruises to the highest level. It also issued the warning that the risk remains very high in spite of vaccination status.
The idea underpinning this argument is that cruise ship operators have had to take on increasingly massive debt loads. Yes, operating cruise ships is a capital intensive business. And yes, Carnival’s debt load has increased. As of Nov. 30 its long-term debt sat at $33 billion. That was up from $26.95 billion a year prior. So yes, it is rising, and yes, most would characterize that as a ‘massive’ debt load.
The consequences of the debt load it took on during the pandemic will be felt for several years. But at the same time, Carnival will remain the largest cruise line in the world. It isn’t dead, it isn’t going bankrupt, and no other cruise line is going to usurp its position in the industry.
But it isn’t as if Carnival is at risk of going bankrupt. At last check, it maintained $7.8 billion in liquidity. Yes, that’s less than the $9.51 billion in liquidity it reported a year earlier. Losing over $1 billion is a big loss, but considering their operations have been shuttered almost entirely, it’s impressive they still have that much.
In other words, Carnival is still the biggest cruise ship operator on the planet, and that means its still a rebound and reopening play.
Dare I say, this generational buy opportunity in this current era of inflation and despair may prove to be the best investment I have made since Bitcoin back in ~2013
That is NOT to say it WONT go lower in the short term, in fact RH finally allows for limit orders and I have more set down to $4.
But this is a definite buy and forget.
It, along with Royal Caribbean and Norwegian Cruise Line simply define the industry. The three companies collectively account for $52.96 billion of the $53.42 billion in market capitalization within the cruise line sector.
Carnival is the largest and most important player in the industry.
IGNORE THE BEARISH TAKE AND INSTEAD BUY AND FORGET
The bear thesis against Carnival relates to the ongoing pandemic. It has been a very trying period for cruise ship operators. That long, trying journey continues. In fact, at the end of 2021 the CDC increased its travel warning for cruises to the highest level. It also issued the warning that the risk remains very high in spite of vaccination status.
The idea underpinning this argument is that cruise ship operators have had to take on increasingly massive debt loads. Yes, operating cruise ships is a capital intensive business. And yes, Carnival’s debt load has increased. As of Nov. 30 its long-term debt sat at $33 billion. That was up from $26.95 billion a year prior. So yes, it is rising, and yes, most would characterize that as a ‘massive’ debt load.
The consequences of the debt load it took on during the pandemic will be felt for several years. But at the same time, Carnival will remain the largest cruise line in the world. It isn’t dead, it isn’t going bankrupt, and no other cruise line is going to usurp its position in the industry.
But it isn’t as if Carnival is at risk of going bankrupt. At last check, it maintained $7.8 billion in liquidity. Yes, that’s less than the $9.51 billion in liquidity it reported a year earlier. Losing over $1 billion is a big loss, but considering their operations have been shuttered almost entirely, it’s impressive they still have that much.
In other words, Carnival is still the biggest cruise ship operator on the planet, and that means its still a rebound and reopening play.
Dare I say, this generational buy opportunity in this current era of inflation and despair may prove to be the best investment I have made since Bitcoin back in ~2013
That is NOT to say it WONT go lower in the short term, in fact RH finally allows for limit orders and I have more set down to $4.
But this is a definite buy and forget.