Carnival's rough seas open opportunity for investors
The cruise line is suffering from a string of nasty incidents, sullying its image. But it should weather this storm and provide good future returns.
Power failed on the Carnival Dream earlier this month while the vessel was docked in the Caribbean island of St. Maarten. Its toilets also failed, turning a dream vacation into nauseating nightmare. Yet another mishap occurred on a Carnival vessel over the weekend, when the Carnival Legend was forced to scrap a stopover in the Cayman Islands because of a technical problem.
Not surprisingly, the company is conducting a comprehensive safety review of all its ships, which seems to be long overdue.
Individually, these reports are disturbing, but the fact that these incidents came so close to one another has created a public relations crisis for Miami-based Carnival. These problems are weighing on the company's stock after the company recently slashed its earnings outlook for 2013. Shares of Carnival have plunged more than 9% over the last three months as the overall stock market has hit record highs.
Though the company has its challenges, one of them isn't its product. Cruising is a cost-effective way of taking a vacation, particularly if people want to see different destinations near one another as in in the Caribbean. Ships are basically floating hotels that provide every creature comfort imaginable and enable vacationers to do as much or as little as they want.
When things go wrong on cruise ships, though, the results can be disastrous. Ships can become ideal breeding grounds for germs. Power failures can turn luxury vessels into floating outhouses when wastewater treatment systems break down. The vacation horrors can be costly for cruise ship operators because thousands of passengers may need to be transported, fed and lodged.
Wall Street, though, isn't ready to abandon ship on Carnival, and neither should investors. The recent fall in the stock price indicates sentiment regarding the stock is lukewarm at best. However, for those willing to take on some risk, Carnival is worth the gamble.
For one thing, the average 52-week price target on the stock is $42.08, more than 20% above where it currently trades. Carnival's price-to-earnings ratio is 21.45, under its five-year high, indicating it's a compelling value as does its recent, better-than-expected quarterly earnings.
Cruising is a good deal for vacationers and will become even more attractive as the economic rebound continues. That rising tide will left all boats, even those owned by Carnival.
The company may be in rough seas now, but they won’t last forever.
Like anything mechanical, Preventive Maintenance is critical. Like the old Fram Oil Filter commercial said: "You can pay me now or pay me later!"
Unfortunately, Later is NOW for Carnival!
I cruised with Carnival for my honeymoon and it was awesome. I'm sorry that these passengers encountered issues with their ship, but my experience was flawless. The company and crewmembers went out of their way to make sure my wife and I had a great time. The room service was amazing, the dinner service was top notch and the general amenities were outstanding as well. The drink of the day was delivered to each person with a smile. Matter of fact, I didnt find a single staff member that wasn't smiling. Even the janitors!
I would definitely cruise with Carnival again even though they had some issues recently. It's hard to fault the company for mechanical issues. I work in maintenance and I can tell you that all the care and servicing in the world can't prevent all problems from occurring. Sometimes things just happen. It appears Carnival has offered complimentary services to those who were inconvenienced. What more is required?
I don't agree with those that sue a company over stuff like this. This was not deliberate and willful wrongdoing. It was a mechanical malfunction. Go easy on them!
We went on the Carnival Valor in January and had booked 3 more cruises for this year to up grade our status to Platinum.
Get back in top shape Carnival
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