Hjielee
2021-06-21
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Carnival: Ludicrous Mode
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{"i18n":{"language":"zh_CN"},"detailType":1,"isChannel":false,"data":{"magic":2,"id":167667391,"tweetId":"167667391","gmtCreate":1624266149313,"gmtModify":1634008687500,"author":{"id":3579863467433362,"idStr":"3579863467433362","authorId":3579863467433362,"authorIdStr":"3579863467433362","name":"Hjielee","avatar":"https://static.tigerbbs.com/9ef12381db69d61c9c70c8b77d7157cf","vip":1,"userType":1,"introduction":"","boolIsFan":false,"boolIsHead":false,"crmLevel":5,"crmLevelSwitch":0,"individualDisplayBadges":[],"fanSize":1,"starInvestorFlag":false},"themes":[],"images":[],"coverImages":[],"extraTitle":"","html":"<html><head></head><body><p>Like and comment</p></body></html>","htmlText":"<html><head></head><body><p>Like and comment</p></body></html>","text":"Like and comment","highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":1,"repostSize":0,"favoriteSize":0,"link":"https://laohu8.com/post/167667391","repostId":1117073468,"repostType":4,"repost":{"id":"1117073468","pubTimestamp":1624261389,"share":"https://www.laohu8.com/m/news/1117073468?lang=&edition=full","pubTime":"2021-06-21 15:43","market":"us","language":"en","title":"Carnival: Ludicrous Mode","url":"https://stock-news.laohu8.com/highlight/detail?id=1117073468","media":"seekingalpha","summary":"Summary\n\nCarnival shares look tired in the current rally.\nWith its long-term debt situation continui","content":"<p><b>Summary</b></p>\n<ul>\n <li>Carnival shares look tired in the current rally.</li>\n <li>With its long-term debt situation continuing to worsen, and with it interest expense, the business is impaired.</li>\n <li>The current share price is pricing in a ludicrously unrealistic recovery.</li>\n</ul>\n<p>The cruise line stocks have been in the midst of a prolonged rally since the vaccine became a reality last fall. The group has soared, including one of its major constituents,<b>Carnival Corp.</b>(CCL). I’ve been critical of the valuations in the sector because I see overly optimistic investors bidding up the stocks of cruise operators without concern for the long-term damage that has been done to their business models. In the case of Carnival, that is very much the case, but the chart is suggesting caution is warranted as well.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/4c105625684d84d58f9e6641691a5cdf\" tg-width=\"640\" tg-height=\"615\" referrerpolicy=\"no-referrer\"><span>Source: StockCharts</span></p>\n<p>I’ve annotated a rectangular consolidation that has been forming since February, with the bottom near $24 and the top near $31. Rectangular consolidations following strong uptrends are bullish typically, so I would normally say Carnival is digesting gains and readying for a new push higher. But in this case, the rectangle was broken early this month, but the breakout failed.</p>\n<p>I’ve circled the area of the failed breakout, and shares have fallen quickly since then. That is a bearish sign because the bulls had the breakout, but failed to push the stock any higher.</p>\n<p>In addition, the accumulation/distribution line is neutral, which isn’t confirming the bull move, or the breakout attempt that occurred. The A/D line isn’t bearish, necessarily, but it isn’t confirming the bullish move that was attempted.</p>\n<p>In addition, the PPO is showing very strong negative divergences, which simply means it is declining while the price has been rising. That indicates bullish momentum is waning, and can often portend the end of a bullish move as rallies become less and less potent as time goes on.</p>\n<p>Taken together, these factors make it look to me like Carnival’s current move off of the November low is more likely to be complete than to continue. And given what I’ll discuss below about just how damaged Carnival is at this point, I’m sticking with my sell rating.</p>\n<p><b>Reality is setting in</b></p>\n<p>The cruise line stocks – among other highly discretionary groups – have been rallying on the prospect of the world’s economy reopening. That has happened to a large extent, but not for cruise lines, which continue to deal with heavy restrictions in most locales.</p>\n<p>That has led to several quarters in a row of Carnival producing essentially no revenue, but on the plus side, the company has setplansto continue to get its ships moving again. Keep in mind that Carnival isn’t anywhere near even a meaningfully sized fraction of its prior capacity, and won’t be for some time to come, at least into 2022. In addition, there will undoubtedly be restrictions in terms of spacing, cleaning measures, etc., that will drive operating costs that are higher than they otherwise would have been as a percentage of revenue. But that isn’t stopping the bulls from blindly bidding up the stock anyway.</p>\n<p>For some perspective on the matter, I think revenue revisions are extremely instructive.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/535c29d74125585f55ef2ce4bacbd615\" tg-width=\"640\" tg-height=\"285\" referrerpolicy=\"no-referrer\"><span>Source:Seeking Alpha</span></p>\n<p>The ever-plummeting orange line is the mean estimate for this year, and it continues to fall unabated. That’s because estimates for this were<i>always</i>too high, even before the pandemic, and analysts have continuously underestimated the negative impact of COVID on Carnival’s ability to generate revenue. In other words, the analyst community has been wrong<i>for years</i>on Carnival’s top line, and continues to lower estimates to try and keep pace. Thus, why should we believe there is some light at the end of the tunnel when Carnival has disappointed investors over and over again? That’s not a leap I’m willing to make.</p>\n<p>The out years have some upward kinks at the end of the lines, indicating some upward revisions, and that’s a good sign. It means that the worst of the revisions could be behind the company, but that assumes that you believe an analyst community that has gotten it wrong for years by being overly optimistic. Is this time different? Anything is possible. Is that something I’m willing to bet on? I think you know the answer to that.</p>\n<p>This has massive implications on the company’s ability to generate earnings because cruise lines operate with huge fixed and operating costs. Thus, volume is absolutely necessary to produce any sort of meaningful profits. We won’t get a read on the company’s new level of operating margins until at least next year, when some meaningful volume of cruises actually take place. But in the interim, there are some costs – both explicit and implicit – that we do have a handle on, and none of it is good news.</p>\n<p>Let’s begin with the balance sheet, which has been ravaged during this crisis.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/e5f65e836dfbd23b70e589bfee554867\" tg-width=\"640\" tg-height=\"169\" referrerpolicy=\"no-referrer\"><span>Source: TIKR.com</span></p>\n<p>Carnival had a huge amount of debt before the pandemic, checking in near $10 billion. Today, it’s nearly 3X that value and rising all the time, because Carnival is burning through huge amounts of cash every single day, and that won’t stop until the cruises start again in earnest. Carnival could easily have $30+ billion in debt before the cruises get going again, and for a company with ~$3 billion in normalizedoperating profit, there is essentially no hope of ever paying down that much debt. The only way Carnival could ever reduce debt back to prior levels is to issue even more common shares (more on that in just a bit), or asset sales, which would further exacerbate its revenue/profit situation.</p>\n<p>Further, we can see Carnival is now on the hook for ~$400 million in<i>quarterly</i>interest expense, an unbelievably huge sum when viewed in comparison to pre-pandemic levels.</p>\n<p>This will continue to rise into next year because Carnival has to keep borrowing as it burns through cash, waiting for the pandemic to end. We could see ~$2 billion in annual interest expense next year, which would be roughly two-thirds of normalized operating profit. And keep in mind I’m not suggesting Carnival will hit normalized operating profit next year; I’m simply providing context for the ruinously expensive hole Carnival is in right now with its financing situation.</p>\n<p>Finally, as if that weren’t enough, Carnival’s share count has ballooned during this crisis because it had no other sources of funds to keep the lights on.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/2ac33f6ea2957c3d3e64559f472488e5\" tg-width=\"640\" tg-height=\"168\"><span>Source: TIKR.com</span></p>\n<p>This means that when/if Carnival does start to produce profits again, it will have to produce a staggering ~70% more profit on a dollar basis just to line up equal to pre-pandemic levels of EPS. In other words, because today’s share count is 69% higher than it was at the end of February 2020 – before the share issuances began – each dollar of profit is spread over 69% more shares. That makes each share’s spread of the profits worth 69% less than it otherwise would have been.</p>\n<p><b>The extent of the problem</b></p>\n<p>This all leads us to valuing the stock, which points to only one conclusion for me; Carnival needs to pull way back from where it is today.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/e59adf15d725fe2e89c45e9ff1c75742\" tg-width=\"640\" tg-height=\"286\"><span>Source:Seeking Alpha</span></p>\n<p>EPS revisions are hideously negative, similar to revenue, but that’s beside the point here. The company isn’t expected to produce any sort of meaningful earnings until 2023, and even out to 2026, is only at $3.11. But keep in mind that based upon Carnival’s EPS revision history, these estimates are almost certainly too high. But even if we take these at face value, buyers of the stock today are unbelievably optimistic.</p>\n<p>Fiscal 2018was the best year Carnival has ever had when measured by net income, which came to $3.15 billion. That’s a lot of money, and reflected extremely favorable macro factors for cruise lines, which Carnival took full advantage of. Now, we know the company is running at ~$1.5 billion in incremental interest expense over and above fiscal 2018, and we know that the share count is about 60% higher than fiscal 2018.</p>\n<p>If we assume Carnival will hit $3.15 billion in net income again, which would be a company record, that would be spread over ~60% more shares, which would put it in the area of $2.70 in EPS, not the $4.45 the company actually produced with that level of net income. Now, Carnival has to pay an additional $1.5 billion (give or take) in annual interest expense as well, so we’d actually need to see the company produce another $1.5 billion in operating profit over and above fiscal 2018,<i>just to get to $3.15 billion</i>in net income.</p>\n<p>To get to $4.45 again, Carnival would need to cover the additional $1.5 billion in interest expense, and the ~60% higher share count. That means that instead of the $3.4 billion in operating income Carnival produced that year, it would need nearly<i>$7 billion</i>in operating income to produce the same number (covering the incremental interest expense and higher share count).</p>\n<p>When we put all of this together, shareholders today are betting that Carnival will blow past prior records it had produced in terms of operating and net earnings, and that it has some way to sustain $30 billion in debt, and that it won’t simply continue to issue new shares of stock to fund itself.</p>\n<p>When laid out like this, I simply don’t understand anyone wanting to own Carnival. The current valuation implies a rapid ascent to new heights in terms of earnings, and that is not just imprudent, it is delusional. Carnival is in its own form ofLudicrous Mode, but in this case, that's not a good thing.</p>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Carnival: Ludicrous Mode</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nCarnival: Ludicrous Mode\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-06-21 15:43 GMT+8 <a href=https://seekingalpha.com/article/4435729-carnival-ludicrous-mode><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Summary\n\nCarnival shares look tired in the current rally.\nWith its long-term debt situation continuing to worsen, and with it interest expense, the business is impaired.\nThe current share price is ...</p>\n\n<a href=\"https://seekingalpha.com/article/4435729-carnival-ludicrous-mode\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"CCL":"嘉年华邮轮"},"source_url":"https://seekingalpha.com/article/4435729-carnival-ludicrous-mode","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1117073468","content_text":"Summary\n\nCarnival shares look tired in the current rally.\nWith its long-term debt situation continuing to worsen, and with it interest expense, the business is impaired.\nThe current share price is pricing in a ludicrously unrealistic recovery.\n\nThe cruise line stocks have been in the midst of a prolonged rally since the vaccine became a reality last fall. The group has soared, including one of its major constituents,Carnival Corp.(CCL). I’ve been critical of the valuations in the sector because I see overly optimistic investors bidding up the stocks of cruise operators without concern for the long-term damage that has been done to their business models. In the case of Carnival, that is very much the case, but the chart is suggesting caution is warranted as well.\nSource: StockCharts\nI’ve annotated a rectangular consolidation that has been forming since February, with the bottom near $24 and the top near $31. Rectangular consolidations following strong uptrends are bullish typically, so I would normally say Carnival is digesting gains and readying for a new push higher. But in this case, the rectangle was broken early this month, but the breakout failed.\nI’ve circled the area of the failed breakout, and shares have fallen quickly since then. That is a bearish sign because the bulls had the breakout, but failed to push the stock any higher.\nIn addition, the accumulation/distribution line is neutral, which isn’t confirming the bull move, or the breakout attempt that occurred. The A/D line isn’t bearish, necessarily, but it isn’t confirming the bullish move that was attempted.\nIn addition, the PPO is showing very strong negative divergences, which simply means it is declining while the price has been rising. That indicates bullish momentum is waning, and can often portend the end of a bullish move as rallies become less and less potent as time goes on.\nTaken together, these factors make it look to me like Carnival’s current move off of the November low is more likely to be complete than to continue. And given what I’ll discuss below about just how damaged Carnival is at this point, I’m sticking with my sell rating.\nReality is setting in\nThe cruise line stocks – among other highly discretionary groups – have been rallying on the prospect of the world’s economy reopening. That has happened to a large extent, but not for cruise lines, which continue to deal with heavy restrictions in most locales.\nThat has led to several quarters in a row of Carnival producing essentially no revenue, but on the plus side, the company has setplansto continue to get its ships moving again. Keep in mind that Carnival isn’t anywhere near even a meaningfully sized fraction of its prior capacity, and won’t be for some time to come, at least into 2022. In addition, there will undoubtedly be restrictions in terms of spacing, cleaning measures, etc., that will drive operating costs that are higher than they otherwise would have been as a percentage of revenue. But that isn’t stopping the bulls from blindly bidding up the stock anyway.\nFor some perspective on the matter, I think revenue revisions are extremely instructive.\nSource:Seeking Alpha\nThe ever-plummeting orange line is the mean estimate for this year, and it continues to fall unabated. That’s because estimates for this werealwaystoo high, even before the pandemic, and analysts have continuously underestimated the negative impact of COVID on Carnival’s ability to generate revenue. In other words, the analyst community has been wrongfor yearson Carnival’s top line, and continues to lower estimates to try and keep pace. Thus, why should we believe there is some light at the end of the tunnel when Carnival has disappointed investors over and over again? That’s not a leap I’m willing to make.\nThe out years have some upward kinks at the end of the lines, indicating some upward revisions, and that’s a good sign. It means that the worst of the revisions could be behind the company, but that assumes that you believe an analyst community that has gotten it wrong for years by being overly optimistic. Is this time different? Anything is possible. Is that something I’m willing to bet on? I think you know the answer to that.\nThis has massive implications on the company’s ability to generate earnings because cruise lines operate with huge fixed and operating costs. Thus, volume is absolutely necessary to produce any sort of meaningful profits. We won’t get a read on the company’s new level of operating margins until at least next year, when some meaningful volume of cruises actually take place. But in the interim, there are some costs – both explicit and implicit – that we do have a handle on, and none of it is good news.\nLet’s begin with the balance sheet, which has been ravaged during this crisis.\nSource: TIKR.com\nCarnival had a huge amount of debt before the pandemic, checking in near $10 billion. Today, it’s nearly 3X that value and rising all the time, because Carnival is burning through huge amounts of cash every single day, and that won’t stop until the cruises start again in earnest. Carnival could easily have $30+ billion in debt before the cruises get going again, and for a company with ~$3 billion in normalizedoperating profit, there is essentially no hope of ever paying down that much debt. The only way Carnival could ever reduce debt back to prior levels is to issue even more common shares (more on that in just a bit), or asset sales, which would further exacerbate its revenue/profit situation.\nFurther, we can see Carnival is now on the hook for ~$400 million inquarterlyinterest expense, an unbelievably huge sum when viewed in comparison to pre-pandemic levels.\nThis will continue to rise into next year because Carnival has to keep borrowing as it burns through cash, waiting for the pandemic to end. We could see ~$2 billion in annual interest expense next year, which would be roughly two-thirds of normalized operating profit. And keep in mind I’m not suggesting Carnival will hit normalized operating profit next year; I’m simply providing context for the ruinously expensive hole Carnival is in right now with its financing situation.\nFinally, as if that weren’t enough, Carnival’s share count has ballooned during this crisis because it had no other sources of funds to keep the lights on.\nSource: TIKR.com\nThis means that when/if Carnival does start to produce profits again, it will have to produce a staggering ~70% more profit on a dollar basis just to line up equal to pre-pandemic levels of EPS. In other words, because today’s share count is 69% higher than it was at the end of February 2020 – before the share issuances began – each dollar of profit is spread over 69% more shares. That makes each share’s spread of the profits worth 69% less than it otherwise would have been.\nThe extent of the problem\nThis all leads us to valuing the stock, which points to only one conclusion for me; Carnival needs to pull way back from where it is today.\nSource:Seeking Alpha\nEPS revisions are hideously negative, similar to revenue, but that’s beside the point here. The company isn’t expected to produce any sort of meaningful earnings until 2023, and even out to 2026, is only at $3.11. But keep in mind that based upon Carnival’s EPS revision history, these estimates are almost certainly too high. But even if we take these at face value, buyers of the stock today are unbelievably optimistic.\nFiscal 2018was the best year Carnival has ever had when measured by net income, which came to $3.15 billion. That’s a lot of money, and reflected extremely favorable macro factors for cruise lines, which Carnival took full advantage of. Now, we know the company is running at ~$1.5 billion in incremental interest expense over and above fiscal 2018, and we know that the share count is about 60% higher than fiscal 2018.\nIf we assume Carnival will hit $3.15 billion in net income again, which would be a company record, that would be spread over ~60% more shares, which would put it in the area of $2.70 in EPS, not the $4.45 the company actually produced with that level of net income. Now, Carnival has to pay an additional $1.5 billion (give or take) in annual interest expense as well, so we’d actually need to see the company produce another $1.5 billion in operating profit over and above fiscal 2018,just to get to $3.15 billionin net income.\nTo get to $4.45 again, Carnival would need to cover the additional $1.5 billion in interest expense, and the ~60% higher share count. That means that instead of the $3.4 billion in operating income Carnival produced that year, it would need nearly$7 billionin operating income to produce the same number (covering the incremental interest expense and higher share count).\nWhen we put all of this together, shareholders today are betting that Carnival will blow past prior records it had produced in terms of operating and net earnings, and that it has some way to sustain $30 billion in debt, and that it won’t simply continue to issue new shares of stock to fund itself.\nWhen laid out like this, I simply don’t understand anyone wanting to own Carnival. The current valuation implies a rapid ascent to new heights in terms of earnings, and that is not just imprudent, it is delusional. Carnival is in its own form ofLudicrous Mode, but in this case, that's not a good thing.","news_type":1},"isVote":1,"tweetType":1,"viewCount":179,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"EN","currentLanguage":"EN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":14,"xxTargetLangEnum":"ORIG"},"commentList":[],"isCommentEnd":true,"isTiger":false,"isWeiXinMini":false,"url":"/m/post/167667391"}
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