Cruise Line Stocks Could “Fall To Zero” Says Banker

by John Konrad (gCaptain) While many shipping stocks have seen record profits this year, the stocks of cruise lines are among the biggest losers in the S&P 500 stock index

Shares of Carnival Cruise Lines $CCL fell more than 15% to below $9 this morning as a banker/analyst at Morgan Stanley warned that the company’s debt load, rising costs, and a possible recession could, in a “worst-case scenario”, send Carnival shares to zero.

The last time shares of Carnival dipped below $9 was in April 2020 when COVID-19 fears reached their peak. Shares rose last summer to above $30 a share as cruises resumed and investors poured into reopening travel stocks but have been falling since.

Norwegian Cruise Line $NCLH, Royal Caribbean Cruises $RCL, and Lindblad Expeditions Holdings $LIND all fell more than 10% in morning trading.

“There’s still no good reason to think cruise line shares have bottomed,” said Deutsche Bank analyst Chris Woronka, in a note to clients last week.

“Recent conversations with investors yields our view that there isn’t likely to be much sustainable buying pressure in the near term,” said Woronka. “Particularly given relative stock performance against other key subsectors and a host of known (as well as some unknown) risks over the next 6-to-12 months.”

Today’s fall includes fears of an impending recession in the US, which could decimate cruise ship passenger demand. According to travel analysts, liquidity could “quickly shrink” if bookings slow or customers withdraw deposits amid a bout of cancellations.

Cruise Line Internal Outlook Remains Positive

Today’s Morgan Stanley report stands in stark contrast to last Friday when Carnival’s stock was up about 10% as the company said it expected bookings for the whole of 2023 to be at the top end of their historical range and to benefit from higher prices.

“Concerning the threat of global recession, while not recession-proof, our business has proven to be recession-resilient time and again,” Chief Executive Officer Arnold Donald said on a post-earnings call.

Donald also said the new CEO, who takes the helm in August, may consider selling off poorly performing brands to improve the company’s bottom line.

Today in response to Morgan Stanely, Carnival issued a statement claiming the company reiterated it is “making strong progress” as it continued to restart its fleet around the globe. “There is pent-up demand for cruising and our occupancy levels continue to rise with our Carnival Cruise Line brand at 100% last quarter and forecasting 110% occupancy for the third quarter.”