Yahoo Finance Live examines Carnival Cruise's stock after its latest earnings miss signifies a much longer path to profitability than expected.
SEANA SMITH: Carnival's selling off today, shares sinking-- look at that-- 23%, knocking about $3 billion off of its market value, on track for its worst day that we've seen since 1992. The cruise line missing Wall Street expectations, as it takes longer than expected to rebound from the pandemic. Higher costs are a big headwind here for the company, delaying its return to profitability here. This massive drop standing out, also taking some of its competitors along with it.
The industry, Rachelle, can't really quite recover from the pandemic. There's also, of course, worry about the economy slipping into a recession, what that could potentially do here for a name like-- for, really, the cruise industry at large. Stifel was out with a note saying recession could prompt Carnival to raise more cash in a way that continues to hurt its balance sheet and its stock price. That's almost hard to believe, with shares off just around 65% since the start of the year.
RACHELLE AKUFFO: I mean, now as we're seeing there, Royal Caribbean, Norwegian also taking a beating there. And it was just recently, it does seem like it's sort of one step forward, two steps back for the cruise industry. We saw that when Royal Caribbean reported their earnings, they talked about bookings accelerating and actually outpacing pre-pandemic levels, and even seeing over 90% of the bookings made in the second quarter that were new. They were saying that the demand is there. They're really expectant about this.
But then you have news from Carnival really sinking some of these other cruise lines as well. So I think, as you mentioned, it's a mixed picture. They seem to be getting a bit of good news, a bit of bad news. But as we can see, suffering at the minute. Dave.
DAVE BRIGGS: Carnival up, bookings, 15% to 84%. That's up from 54% a year prior. So a lot of progress, but they're showing increased costs across the board. And you can't ignore the massive number Carnival's dealing with, $9 billion in debt due by 2025. That is a monster, but it's got to be one of two things.
It's got to be this is a decent buy, or it is the end of the road. Why do I say the end of the road? That was the song that was number one in 1992. That's when Carnival stock last sat at these levels. 1992 levels. So you're telling me this stock isn't going to be a decent buy in the long run? If not, it is the end of the road.
SEANA SMITH: Yeah, I mean, the bookings, when you take a look at the numbers, the booking numbers don't look that bad, right? If you take a look at the demand, it is slowly returning, but it's in terms of the prices that they're paying.
DAVE BRIGGS: Discounts.
SEANA SMITH: Right now, they're paying lower prices. A lot of that is due to travel credits. So yes, demand might be returning, but it just might take us a little bit longer to get back to those pre-pandemic levels than initially what Carnival had been forecasting here, coming out of the pandemic.
DAVE BRIGGS: What you hear them say in their report is they really want to wean people off of the discounts they've been offering over the past year because that's why their bookings are up, because they've been offering great deals. They're going to have to stop that to make some money.
SEANA SMITH: Yeah, again, the stock off just around 23%.
DAVE BRIGGS: Good luck to them.