Carnival Corp (CCL) posted a preliminary $4.4 billion loss in the second quarter as the coronavirus pandemic has forced cruise ship companies to halt operations and suspend cruises.
Shares dropped 6.9% to $17.77 in pre-market trading after the world’s biggest cruise operator warned that it expects a net loss on both a U.S. GAAP and adjusted basis for the second half of 2020. Carnival expects the monthly average cash burn rate for the second half of the year to amount to about $650 million and said that it was also planning to accelerate the sale of more ships.
Revenue in the second quarter ended May 31, plunged to $700 million from $4.8 billion a year earlier. Sales missed analysts’ expectations by $37.8 million.
“Cruise operations have been in a pause for a majority of the second quarter,” Carnival said in a statement. “In addition, the company is unable to definitively predict when it will return to normal operations.”
Meanwhile, the cruise operator said that it is seeing growing demand from new bookings for 2021. For the six weeks ending May 31, 2020, about two-thirds of 2021 bookings were new bookings, the company said.
As of May 31, Carnival had a total of $7.6 billion of available liquidity and $8.8 billion in export credit facilities that are available to fund ship deliveries originally planned through 2023.
Carnival has this year seen its shares shed as much as three-quarters of their value following major coronavirus outbreaks on a number of cruise ships, including Carnival’s Diamond Princess. The stock has seen some relief over the past month soaring more than 50% as the cruise operator experienced a surge in bookings amid prospects that it may restart some cruises in August.
Still, analysts are for now staying on the sidelines. The Hold analyst consensus shows 8 Hold ratings and 4 Sell ratings versus 3 Buy ratings. The average price target stands at $15.66, reflecting 18% downside potential over the coming year. (See CCL’s stock analysis on TipRanks)
Meanwhile JPMorgan analyst Brandt Montour this month raised the stock’s price target to $20 from $16, while maintaining a Hold rating, saying that the shares are reflecting a “reasonable, albeit slow,” recovery in operations.
In the short-term though, Montour expects shares to “remain choppy and range-bound” until investors receive more clarity on “several pressure points,” including sailing requirements, firm restart dates, and signs that new cruisers and older passengers will reengage with the product.
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