Carnival Stock Up 5% in September – Time to Buy CCL Stock?

The price of Carnival stock is up more than 5% so far this month following last week’s pronounced three-day uptick that ended up pushing the price of the cruise operator to its highest level since early July.

According to a business update published last Friday, adjusted net losses for the Miami-based tourism company during the third quarter of its 2021 fiscal year came in nearly $300 million higher compared to the previous quarter at $2 billion as a result of weaker than expected bookings during this period.

However, Carnival’s management team made some upbeat comments in regards to the firm’s outlook as the cruise line operator is already seeing its bookings for the first semester of 2022 surging above pre-pandemic levels.

Moreover, the company expects to operate at 61% of its capacity by the end of November 2021 and at 75% by the end of the first six months of 2022.

Investors were buoyed by the news as reflected by the 3% uptick the stock experienced on the day that the report came out while CCL stock is trading 1.8% higher this morning in pre-market stock trading action at $25.9 as well.

Can this three-day jump be signaling a full-blown trend reversal for Carnival stock? In the following article, I’ll assess the latest price action to possibly answer that question.

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Carnival Stock – Technical Analysis

The latest action in Carnival stock has led to the formation of what seems to be a flag pattern. Typically, the appearance of this pattern after a pronounced downtrend, like the one CCL stock experienced during the June-July period, would signal the continuation of that trend.

However, it remains to be seen if the pattern plays out as expected as this latest positive report is favoring a bullish mid-term outlook for the business.

Trading volumes exceeded the 10-day average by at least 1.5 times on both Thursday and Friday while momentum indicators surged to positive territory.

In this regard, the Relative Strength Index moved to 62, its highest reading since June, while the MACD has just crossed above the signal line – typically a buy signal – on the back of steadily rising histogram readings.

Moving forward, it would be positive to see the stock price breaking above the upper bound of the flag to fully invalidate the pattern. Such a move should confirm a bullish outlook on CCL stock.

At the moment, the stock is riding a golden cross that took place in early September and this uptrend in CCL’s short-term moving averages may continue to support the rally.

Carnival Stock – Fundamental Analysis

Many of the comments made by the management as part of this Q3 business update can be considered bullish for Carnival. First, analysts were expecting to see the firm posting sales above pre-pandemic in 2023.

The fact that Carnival is already reporting bookings above 2019 levels for the first semester of 2022 could be a sign that the business will recover earlier than expected. That said, it is highly likely that the average price per ticket sold had to be dramatically lowered to lure passengers into buying.

Moreover, the company’s cash burn during the third quarter of 2021 stood at $510 million – in line with the management’s expectations for the period. Meanwhile, the company reported $7.8 billion in liquidity and, according to the management, these resources should be “sufficient” to keep the firm afloat until it becomes cash-flow positive.

At its current price of $25.4 per share, the company is trading at 1.8 times its tangible book value per share and at 9.1 times its 2019 normalized diluted earnings per share. This valuation seems fairly conservative considering that liquidity concerns are not weighing on the firm’s future anymore.

With this in mind, and considering the technical bullish outlook pointed above, this could be a good moment to buy for long-term investors.

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