After a series of COVID-19 outbreaks occurred on multiple cruise ships, the Centers for Disease Control and Prevention (CDC) issued no-sail orders that forced Carnival and other cruise operators to cancel their U.S. voyages. With their ships stuck at port and little revenue coming in, the major cruise lines quickly began bleeding cash.
By the second half of 2020, Carnival's cash burn rate had reached approximately $650 million per month. To stay afloat, Carnival was forced to raise billions in cash via stock sales and high-interest-rate debt, diluting shareholders and increasing its interest costs in the process.
With health officials in the U.S. and international markets beginning to rescind their no-sail orders, Carnival is slowly resuming operations. Promising vaccines developed by the likes of Moderna and Pfizer could accelerate this process, if they can help to reduce COVID-19 infection rates and bring about the end of the pandemic. Carnival's stock price, in turn, could rebound in 2021.
Still, risks remain. Higher interest expenses and safety-related costs will make it more difficult for Carnival to achieve its pre-pandemic profit margins. And with more shares outstanding after its stock offerings, investors may find is per-share profits less attractive.