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Can Carnival's share price cruise to a new 2021 high?


7 April 2021 Written by Hussein Al Sayed  Chief Market Strategist at Exinity Group (Gulf & MENA) Hussein Sayed

Carnival Corporation is set to unveil its latest quarterly earnings on Wednesday, 7 April. The cruise operator’s financial results for the three months ending 28 February are set to bear the deep scars inflicted by the global pandemic. Yet investors have been willing to pay scant attention to such backward-looking figures. Instead, they have been looking forward to the day when Carnival’s cruise ships will set sail once more, filled with holiday goers who are eager (and also hopefully vaccinated) for a break from the lockdowns around the world. Such hopes have catapulted the stock higher by almost 260% since 2 April 2020!

Carnival’s stock price still a long way from pre-pandemic levels

Following an 85% plunge between 17 January until 2 April last year, Carnival’s stock ended up sinking below the $8.00 mark to hit its lowest levels since 1993. Despite the stunning recovery in the 12 months since, the stock currently remains about 45% lower from its pre-pandemic high, when it breached the $50 mark in January 2020.

From a technical perspective, Carnival’s stock recently enjoyed support at its 50-day simple moving average. And with its MACD momentum poised to break above its signal line, coupled with the fact that its 14-day relative strength index has yet to reach technically overbought levels, the stock appears on the cusp of exploring more of its upside.

Although there is still a notable distance between its current share price from pre-pandemic levels, such a gap also signals the potential upside for Carnival’s stock, as its business eventually is restored.

How might Carnival’s share price perform today?

Market participants are poised to react to any commentary or details today about when more of Carnival’s cruises can resume. Any developments related to advanced bookings and pricing could reveal a lot about the pent-up demand for the company’s products and offerings.

Markets are pricing in a 5.56% move, either upwards or downwards, when Carnival releases its fiscal Q1 earnings. Note that this stock is now 4% away from this year’s highest closing price, set on 15 March.

Carnival’s share prices registered gains after 4 out of the past 5 quarterly earnings announcements. Despite some negative surprises in the hard numbers, clearly many investors and traders had little qualms getting on board with this stock, pushing it higher by 32% already so far this year. Still, going into the earnings announcement, at least 5% of Carnival’s shares are being shorted.

What are the market expectations for Carnival’s fiscal Q1 earnings?

Wall Street predicts that Carnival’s latest quarterly revenue would come in at $66.9 million, and an adjusted loss per share of $1.68 for the period. For Carnival’s bottom line, Wall Street is forecasting a net loss of $1.74 billion in this latest financial quarter, which would mark a fifth consecutive fiscal quarter of net losses for the cruise operator. No surprise also that its top line has been wiped out by Covid-19, dwindling to a mere pittance versus the average $5.1 billion in quarterly revenue it used to rake in since December 2018 until the pandemic struck.

It is also estimated that Carnival had to burn through $600 million per month between December 2020 and February 2021 in trying to keep its business afloat. Carnival’s decision to get rid of 19 ships off its books did help pad up its cash buffers, adding to the billions raised via sales of bonds and common shares.

Is the tide turning?

However, Carnival’s fortunes are set to reverse course in the coming months.

As the Covid-19 vaccine continues making its way throughout the globe, allowing for leisurely travel to resume, that should in turn bolster Carnival’s business and stock prospects. The question now is whether this party is just getting started and the stock can climb much higher, or has this ship already sailed?

Much rests on what Carnival’s management conveys today, and how well they can dispel the lingering uncertainties surrounding its business outlook. Carnival’s commentary today could potentially signal the next wave of either buying or selling of this stock, even as most of its fleet remains docked for now.

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