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Is Carnival Corporation’s Stock Preparing for a Big Upswing?

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Written by Timothy Sykes Reviewed by Jack Kellogg Fact-checked by Ellis Hobbs

Carnival Corporation’s recent market performance has been heavily influenced by increasing public scrutiny over its operational challenges and financial health, particularly in light of ongoing global economic uncertainties. Headlines highlighting these issues have contributed to negative sentiment among investors. Reflecting this, on Wednesday, Carnival Corporation’s stocks have been is trading down by -3.79 percent.

HSBC’s Revised Price Target Sparked Interest: HSBC adjusted its price target for CCL from $13 to $14, maintaining their reduce rating. Analysts provide an average outperform rating with varied targets from $14 to $28.

Candlestick Chart

Live Update at 16:01:42 EST: On Wednesday, September 25, 2024 Carnival Corporation stock [NYSE: CCL] is trending down by -3.79%! Discover the key drivers behind this movement as well as our expert analysis in the detailed breakdown below.

What’s Happening with Carnival Corporation?

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Revised Analyst Expectations: HSBC has revised its price target for CCL, raising it to $14 from $13, although it maintains a reduce rating. Analysts are divided with price targets ranging from $14 to $28.

Quick Overview of Carnival Corporation’s Recent Earnings Report and Key Financial Metrics

Carnival Corporation’s recent earnings report shows mixed results. The company, which operates around the globe, reported revenue of $5.78 billion for the most recent quarter ending May 31, 2024. Despite this enormous revenue figure, costs and expenses have not been kind. The total expenses for the quarter hit $7.6 billion, leading to a net income of only $91 million, translating to a basic EPS of $0.07.

The balance sheet reveals interesting details. Carnival has large non-current liabilities of $29.4 billion, with cash equivalents standing at over $1.6 billion. While the company’s current assets total approximately $3.77 billion, the current liabilities exceed $13.38 billion. This leaves a working capital of -$9.62 billion – a pretty dire situation.

Operating cash flow recently saw a significant boost to $2.03 billion, a 20% increase. This positive cash flow is a beacon for potential stability in an otherwise turbulent financial sea.

More Breaking News

Financial Performance Analysis

Carnival’s EBITDA stood at $767 million for the last quarter, with EBIT barely reaching $97 million. While EBITDA margins are a decent 20.7%, EBIT margins at 10.1% are less impressive. Despite these slim margins, the P/E ratio of 27.14 suggests investors are still betting on future growth.

What about profitability? The pre-tax profit margin is a concerning -39.3%, indicating significant cost pressures. Not to mention, the return on equity sits at a dismal -33.63%, further highlighting challenges.

Carnival’s revenue per share is at $19.2373, showcasing its sizable market presence. However, its price-to-sales ratio is a low 1.05, suggesting the market isn’t rewarding these revenues as much. The price-to-free cash flow ratio is at 8.5, making the stock somewhat affordable.

Behind the Numbers: Carnival’s Challenges

Understanding the financial turmoil at Carnival is like navigating choppy seas. The company’s total debt-to-equity ratio is an incredible 4.75, indicating heavy reliance on borrowed funds. With interest coverage at only 3.3 times, even moderate interest rate hikes could pose problems.

The balance sheet also shows high inventory levels, translating to an inventory turnover of 31.8. While this indicates efficient inventory management, the overall asset turnover is 0.5, suggesting room for improving asset utilization.

News Impact and Market Implications

The market reacted to HSBC’s revised target with caution. While the increase to $14 from $13 is a slight boost, maintaining a “reduce” rating implies skepticism about significant near-term gains. Analysts’ varied price targets, ranging from $14 to $28, further reflect this uncertainty. This skepticism was perhaps mirrored in recent trading activities.

Reflecting on Carnival’s Intraday Movements

Reviewing recent intraday data, Carnival’s share prices exhibited volatility. On Sep 24, 2024, prices opened at $19 but retreated to close at $18.04 by the end of the next day. This pattern of peaks and troughs characterizes the trading sentiment and investor uncertainty surrounding the company’s future performance.

Conclusion: Navigating Through Doubts and Optimism

Carnival Corporation stands at a crossroads with financial magnitudes indicating resilience amidst concerns. The revised price target reflects cautious optimism, while recent earnings outline the challenges. Investors need to weigh these factors carefully, aligning their strategies with broader market movements and internal company dynamics. With analyst ratings swinging and market spotlight focused on Carnival, only time will tell if these ships will sail towards clear skies or encounter further storms.

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Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

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Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”