Should I Buy Carnival Corporation (CCL)? Finance YouTuber Analysis

The analyst is bullish on Carnival for the long term, expecting continued double-digit sales growth as the company recovers from the pandemic and returns to positive earnings next year. While the recent run-up might be stretched, the long-term outlook for cruise stocks is positive, driven by Baby Boomer spending.

“Now the recent run may be stretched a little bit but longer term I think crw stocks should do well as that baby boomer spined through the massive wealth accumulation that I talked about in the last week's video”

The YouTuber points out that analysts anticipate Carnival Cruise Lines to be up 108% to its one-year target, indicating a strong belief in the recovery of the cruise sector. He views this high analyst target as a vote of confidence in the company's underlying business and fundamentals, suggesting it has good potential for long-term returns.

“Carnival Cruise lines up 108% to those one-year targets.”

Travis Hoium advises avoiding Carnival stock due to its high debt load of approximately $30 billion. While the company is paying down debt, it is partially relying on customer deposits, which he views as a risky and unsustainable method. He questions the long-term sustainability of current operational improvements and pricing power.

“This isn't a stock that I own just because I think the risks are too high given this debt level.”

Travis Hoium advises avoiding Carnival stock due to four major red flags. The company carries a massive debt load of over $30 billion, its operating income is negative, and increasing costs (payroll, fuel, S&A) are a significant headwind. Furthermore, the interest expense alone is not covered by operating income, making the company unsustainable long-term, especially given its enterprise value is now higher than pre-pandemic levels.

“there are four major red flags to make this an uninvestable stock right now”

Travis Hoium advises against buying Carnival stock due to three red flags: a massive debt load of over $33 billion with high interest expenses, rising consumer debt levels which could impact discretionary spending on cruises, and the potential for a future recession given current favorable operating conditions. He believes the stock is too highly valued and the company is struggling with negative free cash flow.

“it's not a stock that I'm buying right now I just think it's too highly valid”

The analyst advises avoiding Carnival stock due to its unsustainable debt repayment strategy. While the company is paying down some debt, it's primarily using customer deposits from future bookings, rather than operational profits, to do so. This indicates that despite increased bookings, the company's core operations are still losing money, making the debt load a persistent and significant problem.

“Carnival's operations are losing money but they're booking a lot of future bookings and generating cash through deposits from those future bookings some of that cash is being used to fund those ongoing losses and some of it's being used to pay down debt that is not a sustainable structure and it's not really a sign of strength for the company.”

Travis Hoium advises avoiding Carnival stock due to its significantly increased debt load, which has risen from $10 billion to $35 billion since the pandemic. This debt, coupled with rising interest rates, creates substantial interest payment obligations. Furthermore, the company's operations are still burning cash and have not returned to pre-pandemic revenue or profitability levels, making it a high-risk investment.

“honestly this is one of those companies that I want to see it get back to a more sustainable point before even considering investing in it”

Travis Hoium advises against buying Carnival stock due to its substantial debt load of $35 billion, which he believes poses significant risk. He argues that while revenue and net income are improving, the high interest payments and refinancing needs make it difficult for the company to return to pre-pandemic profitability, potentially leading to a restructuring.

“right now I think Carnival is the kind of stock that just has too much risk for the amount of potential reward right now”

The YouTuber highlights Carnival's $35 billion debt load, stating that even with 2019 operating income levels, there would be little money left for net income after debt servicing. He notes their recent debt extension at 5.75% as a temporary measure, but the overall debt burden remains a significant concern.

“now given their 35 billion dollar debt load there wouldn't be much money left over to have any sort of net income for investors so that's really problematic”