Is the risk worth the reward with CCL?
Carnival Corp (NYSE:CCL) is one of the world's largest leisure travel companies with a portfolio of nine cruise line brands. CCL's portfolio of brands features Carnival Cruise Line, Princess Cruises, Holland America Line, Seabourn, P&O Cruises (Australia), Costa Cruises, AIDA Cruises, P&O Cruises (UK), and Cunard, operating across North America, Australia, Europe, and Asia.
Carnival stock has already strung together three-straight monthly losses, and June could very well be its fourth, as the equity has already dropped 28.8% this month, with yesterday's 10.3% drop acting as a huge contributor. Year-to-date, CCL is 50.7% lower, pressured by the 20-day moving average. The stock was last seen down 1.3% at $9.77, and earlier hit a fresh two-year low of $9.63.
Short sellers have been targeting the sinking cruise stock. Short interest rose 19.4% in the last two reporting periods and now makes up a solid 12.7% of the stock's available float, or over three days' worth of pent-up buying power.
CCL continues to have more downside potential in the immediate short-term, as its forward price-earnings ratio of 33.33 and a price-sales ratio of 4.48 remain on the higher end of valuation metrics. In addition, Carnival Corporation runs significant long-term risks due to the large amount of debt it took on to keep the business afloat during the Covid-19 pandemic. CCL currently owes $36.23 billion in total debt, which is almost triple the travel company’s market cap of $16.27 billion. Carnival also holds just $6.93 billion in cash on their balance sheet, which will undoubtedly hurt its long-term growth and profits.
Still, the cruise company is estimated to generate $13.86 billion in revenues for fiscal 2022, indicating 722.3% expected top-line growth. CCL is also expected to report a profitable year by 2023. Estimates suggest the company will produce $1.29 in earnings per share and $21.47 billion in revenues, or 54.9% top-line growth, for fiscal 2023, making Carnival stock is a high-risk, high-reward stock.