Don’t Go Bargain Hunting in Carnival (CCL) Quite Yet

The following first appeared on InvestorPlace.

Few companies have been battered as hard as Carnival Corporation (CCL) by the coronavirus pandemic and resulting lockdowns. Along with hotels and airlines, Carnival has the misfortune of being a travel and leisure company with high overhead and effectively no income for the foreseeable future.

In mid-January, when COVID-19 was hitting the Chinese economy hard but seemed a world away from Europe or the United States, CCL stock traded around $52 per share.

But as the virus spread and investors started to appreciate how quickly the virus had spread, Carnival’s shares went into freefall, dropping all the way to $7.80. At the time of writing, shares were trading at $12.42, 76% below the mid-January levels.

After a drop like that, the bargain hunters start sniffing around. After all, on paper the stock looks cheap, trading at 4.5 times trailing earnings, 0.37 times sales and 0.36 times book value.

Looking at that book value number, you could hypothetically sell off Carnival for spare parts, pay off all its liabilities and still walk away with a substantial profit of over $22 per share.

But resist the urge to run out and buy shares. It might look cheap on paper, but Carnival and its peers among the cruise lines are by no means a safe bet.

To continue reading, see Don’t Go Bargain Hunting on Carnival Stock Quite Yet

This article first appeared on Sizemore Insights as Don’t Go Bargain Hunting in Carnival (CCL) Quite Yet