Please ensure Javascript is enabled for purposes of website accessibility

Why Carnival Corporation Stock Dropped Today

By Travis Hoium – Nov 9, 2021 at 1:05PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Last week's pop may have been a little overdone.

What happened 

Shares of cruise line stock Carnival Corporation (CCL -2.30%) fell as much as 3.1% in trading on Tuesday as investors started to sell some of the stimulus driven stocks. Shares hit their low early in the day but are still down 2.7% at 12:20 p.m. EST. 

So what

The drop looks fairly big today, but the reality is that investors are likely taking some profits from a bounce in shares that happened on Friday of last week. Cruise line stocks jumped across the board after clinical trial data showed that Pfizer's (PFE -0.92%) antiviral treatment reduced the risk of hospitalization or death by 89% for adults with COVID-19. 

Cruise ship sailing near a beach.

Image source: Getty Images.

A pill that can be taken after someone learns they have contracted COVID-19 would be another tool in fighting the pandemic, but alone it probably doesn't fundamentally change the way people will spend money or how comfortable they will be going on a cruise. 

Over the long term, the challenge is that Carnival's revenue is still well below pre-pandemic levels, it's burning cash, and even if it does get back to "normal," the company has tens of billions in new debt to eventually pay off. 

CCL Revenue (Quarterly) Chart

CCL Revenue (Quarterly) data by YCharts

That financial reality is sinking in after a bounce in shares on Friday. 

Now what

Carnival stock continues to be volatile because the future of the business is so uncertain. Customers seem to be coming back, and the company is expanding service, but it's a long way from making enough money to pay back enormous debts. Until we see a recovery, betting on the cruise line industry isn't something I'm ready to do. 

Travis Hoium has no position in any of the stocks mentioned. The Motley Fool recommends Carnival. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.