Carnival Stock Up on News of Stake Sale to Saudi Arabia's PIF

Zacks Equity Research

Carnival Corporation’s CCL shares increased 20% yesterday on reports that Saudi Arabia’s Public Investment Fund (PIF) has acquired 43.5 million shares, or a 8.2% stake in the company. 

Carnival is going through a very tough time due to the coronavirus pandemic. The virus has so far claimed thousands of lives across the globe and brought governments to their knees. Apart from disrupting daily lives and straining the global health care system, the virus outbreak has left businesses around the world in a lurch.

With halting of operations and suspended voyages due to the COVID-19 pandemic, we believe that this divestiture will help the company to meet its daily expenses.

Coronavirus Hits Carnival Hard

Clearly, the Leisure and Recreation Services industry has taken a massive hit owing to stringent restrictions. Markedly, with the Trump administration imposing significant travel embargoes on passengers from 26 European countries, operations at U.S. ports of call were suspended for 30 days.

The spread of COVID-19 and the recent developments surrounding the pandemic are having material negative impacts on all aspects of Carnival’s business.

Recently, it extended the suspension of global cruise operations — Holland America Line, Seabourn and Cunard. The company was required to undertake quarantine of two ships of Princess Cruises line due to the novel coronavirus outbreak.

With continued port closures and travel restrictions surrounding global health concerns, the company’s cruise brands have suspended operations for an additional 30 days, thereby causing cancellation of departures due to begin from May 14.

However, the company is providing guests with an opportunity of either receiving a Future Cruise Credit for 125% of their booking value along with a $250 shipboard credit or a full refund.

We believe that the ongoing effects of COVID-19 on its operations and global bookings will continue until the virus is contained.

Other major cruise operators that have been negatively impacted by the same are Royal Caribbean Cruises Ltd. RCL and Norwegian Cruise Line Holdings Ltd. NCLH. So far this year, shares of Carnival have plummeted 79.9% compared with the industry’s 62.1% decline.



Zacks Rank & Key Pick

Carnival currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A better-ranked stock in the same space is Camping World Holdings Inc. CWH, sporting a Zacks Rank #1. 

Camping World Holdings’ 2020 earnings are expected to surge 163.6%.

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