Carnival Corp’s Princess Cruises announced that it is canceling cruises on two ships in early 2021 citing government-imposed port and border restrictions and the continued uncertainty of airline travel tied to the coronavirus pandemic.
Carnival (CCL) said that is suspending the early 2021 World Cruises and Circle South America cruises on two ships affecting the Island Princess sailing from North America and the Pacific Princess sailing from Australia.
“We share in the disappointment of this cancellation for guests of our world cruises because it’s a pinnacle cruise vacation experience, booked by some of our most loyal guests,” said Jan Swartz, Princess Cruises president.
Carnival shares declined 1.1% in Tuesday’s after-market trading. The stock has this year shed almost 70% of its value following major coronavirus outbreaks on a number of cruise ships, including its Diamond Princess. (See CCL’s stock analysis on TipRanks).
The cruise operator said that guests currently booked on the cancelled voyages will receive a refundable Future Cruise Credit (FCC) equivalent to 100% of the cruise fare paid plus an additional non-refundable bonus FCC equal to 25% of the cruise fare paid.
Due to COVID-19, Carnival paused its guest cruise operations in mid-March but said last month the company said that it expected to resume operations in a phased manner as it had continued to see demand from new bookings for 2021. During the pause in guest operations, the monthly average cash burn rate for 2H is estimated to be $650 million, the cruise operator estimated last month.
SunTrust analyst Patrick Scholes downgraded the stock to Sell from Hold and lowered the price target to $10 from $12, saying that as more resumption date delays are announced, investors will become “increasingly disappointed”.
As a result of the delays Carnival will likely need more debt or equity raises to survive, which is “very expensive” for a distressed company, Scholes wrote in a note to investors.
The rest of the Street is also sidelined on the stock. The Hold analyst consensus shows 12 Hold ratings and 4 Sell ratings versus 2 Buy ratings. The $15.65 average price target implies 1.5% downside potential over the coming year.
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