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Why Shares of Carnival Corp Fell 13.8% in January

By Royston Yang - Feb 5, 2021 at 11:27PM

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The cruise company has reported strong pent-up demand for cruises in 2022 and has also released a set of protocols to minimize the risk of infection.

What happened

Shares of Carnival Corp (CCL 12.44%) fell by 13.8% in January, according to data provided by S&P Global Market Intelligence.

The cruise company's shares have halved from the value they were at a year ago, but are still more than 100% higher than the low reached during March 2020.

Three cruise ships parked adjacent to one another in clear blue waters.

kImage source: Getty images.

So what

Carnival had a devastating year in 2020 as the pandemic triggered border closures and curtailed travel. For the fiscal year ended Nov. 30, 2020, total revenue plunged 73% year over year to just $5.6 billion, and the cruise giant reported an operating and net loss of $8.9 billion and $10.2 billion, respectively. The company had drawn down on credit lines to boost its liquidity; it ended the fiscal year with $9.5 billion in cash and around $26.8 billion in gross debt, and continues to trim its fleet with the recent announcement of the sale of the Pacific Princess to boost its cash.

There was more bad news last month -- Carnival had to notify customers of additional cancellations for U.S. departures through April 30 of this year as the coronavirus continued to rage across the world. The company had also cancelled European itineraries through Oct. 31, and customers are being offered either a full refund or a cruise credit that can be utilized for future dates.

Now what

While the situation may seem bleak, CEO Arnold Donald remains optimistic as he reports on strong booking trends that showcase the strength of the Carnival brand and the pent-up demand for cruises. As of Dec. 20, 2020, cumulative bookings for the first half of 2022 were already ahead of all of 2019.

Also, Carnival has officially released a set of new cruise rules and protocols from the CDC that are designed to minimize the risk of infection. These regulations will be strictly enforced, and any failure to comply with them means that customers will be denied boarding and will not be entitled to any refund or compensation. This set of guidelines is a good first step toward ensuring safe cruising, though it may still take a while before the company's growth can resume.

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