Michael Hakes - CFA, MBA Carnival Corp. CCL-N WEAK BUY Aug 02, 2024

They reported a beat yesterday and shares popped. You may think that taking a cruise is expensive, but some of the features on these cruises are actually a good deal.

Some say that pent-up demand from pandemic is done. However, he thinks there's still some gas left in the tank. Consumers still want to get out. Stock's been extremely choppy. Well run, great management.

Don't buy at these levels for the long term. A play over the next 2-3 years on the premise that economy will not fall into recession and discretionary service products can still stay afloat.

Likes the idea of travel stocks longer term, given global demographics. Trending sideways for the last year, 200-day MA is flat. Though lower interest rates will help the debt situation, you also need to be concerned in the near term with the consumer and the economy.

He'd prefer a name like RCL.

Last week, transportation started to tick up, and he'd include CCL in that group. This one has just broken out of a range, and he really likes the breakout above $20 from the base. If his call on the broader market is correct, should be upside into first half of next year. Could then see retest of highs of 2021, around $30.

It reports Friday. Cruiselines are the most bullish industry on the S&P. You make money anywhere in this group; the street loves it. He expects a good quarter.

Buying cruise lines during any type of viral outbreak is typically a great buying opportunity. However, he bought early on in the pandemic and that was a mistake :(  Likes its wonderful assets that they can move around and pay little in taxes. New suite of ships. Aging demographics. Likes the travel theme.

Economy's weakening, as is the job market. Macro uncertainties are weighing on households, though not on the top 10%. But the top tier is not the target market for CCL. Very high beta of 1.5x. Extraordinarily leveraged at $40B of debt. 

Still off all-time highs of pre-Covid. Needed to do distress equity financing, so share count doubled and shares were diluted.

They report Monday. The cruise industry has been super-bullish since Covid ended. It can continue, though led by Royal, because cruises are a relative bargain in travel.

Cruise lines have done well since pandemic. He owns no names today. Very good growth rate of ~20% ahead. Valuation is fair at this point. Cruise lines have relatively larger debt loads and very strong economic sensitivity. Headwinds of labour and fuel costs. 

Technically, doing OK. See his Top Picks.