Market Overview

Is Carnival's Stock A Buy After Resumption Of Cruises?

Is Carnival's Stock A Buy After Resumption Of Cruises?

Carnival Corp (NYSE: CCL) resumed operations in Europe after its Costa Deliziosa set sail from northern Italy over the weekend. Does this mark a turning point for the stock that is still down more than 60% since the start of 2020?

Could Be 'Enormous': Carnival's resumption of cruises marks an "important test" not only for the company but for the broader cruise industry, Chantico Global CEO Gina Sanchez said on CNBC. If the operators prove they can welcome guests in a safe environment, it would be "enormous" for the cruise stocks.

"The demand is there," she said. "You just have to show that it can be done safely."

Meanwhile, Sanchez said Carnival stands out among its cruise peers as it has the fortunate position of sitting on a "mountain of cash." Carnival's cash burn rate of around $650 million is a small fraction of its $7.8 billion of liquidity.

Carnival clearly has enough liquidity to "stay afloat" and its ultimate success is in its hands is it needs to prove it is possible to operate amid the ongoing COVID-19 pandemic.

Related Link: Carnival Shares Drop As Princess, Cunard Lines Extend Cancellations To Next Year And Beyond

The Case For Royal Caribbean: From a technical point of view, rival operator Royal Caribbean Cruises Ltd (NYSE: RCL) is the more attractive stock to buy, Miller Tabak Chief Market Strategist Matt Maley also said on "Trading Nation."

Royal's stock had a "bigger rally" over the spring and summer but then "kind of rolled back over," he said. Since then the stock established a higher low and this is a positive indicator.

The stock is in the early stages of hopefully a sustainable rally and it's trying to follow the higher low with a higher high.

"If it can break that $75.50 level in any meaningful fashion, I think Royal Caribbean will be the one that has the most momentum as they go into the winter cruise season," Maley said.



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