Carnival Corporation: No Recovery Upside Left – Massive Downside If It Fails


  • Carnival Cruise rose dramatically during the year’s first month due to a potential short squeeze and a surge in “recovery” exuberance.
  • Due to substantial dilutions and debt growth, Carnival’s “full recovery” EPS is likely around 70-75% below its 2019 level.
  • Carnival’s enterprise value is also at its pre-pandemic level, suggesting the stock is priced as if a full operating income recovery is inevitable this year.
  • While Carnival’s operating income may recover this year, household financial strain and rising costs (specifically crew wages) could easily upset the recovery.
  • CCL appears overvalued today since it could lose most of its value if its operating income does not normalize quickly, as its low credit rating limits its financing capacity.
Ship on the sea

DLMcK/iStock Unreleased via Getty Images

The first month of 2023 saw big rebounds in many stocks that crumbled in 2022. Last year was difficult for many stocks as the sharp rise in interest rates combined with a slowdown in economic growth caused a sharp rise in

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Short position through short-selling of the stock, or purchase of put options or similar derivatives in CCL over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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