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Why Carnival Corporation Soared 43.3% in February

By Royston Yang - Mar 4, 2021 at 8:22AM

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The cruise company is enjoying a fillip from the successful global vaccine rollout.

What happened

Shares of Carnival Corporation (CCL 5.75%) (CUK 5.38%) soared 43.3% in February, according to data provided by S&P Global Market Intelligence.

The cruise company hit a year-to-date high and is almost back to the level it was trading at a year ago.

Lady looking out of a cruise ship balcony with her hair blowing in the wind

Image source: Getty images.

So what

With multiple COVID-19 vaccines being distributed around the world, investor sentiment has improved as many believe we may soon see an end to lockdowns and travel curbs. The cruise industry was hit particularly hard as tourism ground to a halt and ships were prevented from sailing for fear of a mass contagion effect. Carnival had informed its customers on Feb. 24 that cruises leaving from U.S. ports remained halted through May 31 but offered customers the choice of either a future cruise credit or a full refund.

Data gleaned from recent inoculations also points to a reduction in COVID-19-related deaths and lower-than-expected infection rates, suggesting that the vaccines are, slowly but surely, beginning to have a positive effect. President Joe Biden has also announced that the U.S. will have sufficient vaccines for every adult by the end of May, two months earlier than anticipated. Riding on this wave of good news, Carnival began offering bookings for its 2022-2023 cruises on its Holland America Line. 

Now what

To be sure, Carnival is not in the clear yet as there is still significant uncertainty surrounding the trajectory of the pandemic. However, the company is not in danger of facing a liquidity crunch. It just sold another $3.5 billion worth of senior unsecured notes due 2027 at a coupon rate of 5.75% to repay its 2021 debt, and also completed the sale of around 40.4 million new shares at $25.10 per share, raising approximately $1 billion. 

It may take a while before Carnival returns to growth again. The COVID-19 pandemic has been one of the worst crises the company has faced. Despite the challenges, Carnival possesses a strong brand name and has an impressive track record of delivering great holiday experiences. Pent-up demand for cruises should ensure that the company enjoys a swift recovery once borders are eventually reopened.

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Stocks Mentioned

Carnival Corporation Stock Quote
Carnival Corporation
CCL
$13.97 (5.75%) $0.76
Carnival Corporation Stock Quote
Carnival Corporation
CUK
$12.94 (5.38%) $0.66

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