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SS/RCCL Finances: Improving, Options, Questions??!!


TLCOhio
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On 6/28/2022 at 9:35 AM, RetiredandTravel said:

It's a little hard to believe that after a 40 year bull run in stocks and bonds through the end of 2021 that public pension funds were underfunded isn't it Terry.   The S&P 500 closed 1981 at 122 and the US Ten Year Note was at 14%.  Lower bond yields have forced actuarial assumptions on investment returns to be decreased some over the years but the bigger issue in my opinion is on the liability side (figure 1 second link "Funding Gap").   Many issues have contributed to the increase in liabilities like an aging population, population migration (less new people to pay old folks pensions), people living longer and the coziness of public pension funds and politicians. Hope it ends well. 

 

Super excellent above background, links and insights from RetiredandTravel.  Very wise and helpful information and questions.  Yes the Illinois Constitution’s pension-protection are costly and hard to sustain and fund long-term.  Who should bail them out of their fiscal mess?

 

Just talked this morning with a long-time, good friend in New York City who has been plugged in with the various financial types there in that region for decades.  He is seeing lots of travel and spending, now, this summer, as people recover from two years of being cooped up and shutdown.  

 

BUT, coming in September is when things really "hit the fan" as per the looming recession, financial tightening, etc.  Lots of "storm clouds" and "choppy waters" are looming.  That will have its serious impacts on the cruise business and other related fields.  He provided me with more specifics and details to back up his future prediction.  We can all hope for the best, but we need to be prepared for future realities.  What goes up, sometimes goes down.  

 

THANKS!  Enjoy!  Terry in Ohio

 

Dubrovnik!  Nice visual samples, tips, details, etc., for this super scenic and historic location. Over 48,835 views.    

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6 hours ago, RetiredandTravel said:

I think the talk of CCL possibly going to 0 probably has people spooked.  Its held the 8.70 (8.66) 52 week low so far. 😬

 

Spooked?  I think so.  And, I seriously doubt that we will see CCL at zero.  Morgan Stanley's analyst has been very negative about CCL for quite some time.  Since I am a MS client, my advisor has not been ringing my phone about this situation.  

 

On 6/28/2022 at 8:13 AM, TLCOhio said:

More than 100 state, city, county and other governments borrowed for their pension funds last year,

 

I don't believe that includes Ohio's public employee pension funds.  At least, not mine.  Friday, July 1, the members of our pension fund will receive our fist COLA in several years.  A whopping 2% increase in our payments!  53% of which will have been spent as the result of filling my gas tank this afternoon.  

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41 minutes ago, rkacruiser said:

Spooked?  I think so.  And, I seriously doubt that we will see CCL at zero.  Morgan Stanley's analyst has been very negative about CCL for quite some time.  Since I am a MS client, my advisor has not been ringing my phone about this situation.  

 

I would like an analyst to clearly say: debt is X, ships are worth Y on the balance (original cost such, but so old, so old fashioned, so much extra maintenance). I wasn't born for accounting, but I think that's where a mistake is made.

 

Ships are sailing, some at full capacity, people have money to burn. And since Omicron nobody seems to care about Covid anymore. 

 

(Also a second ship was chartered in Holland to house another 1000 refugees. It's not necessarily vacationers that add to the demand)

 

If this was the time to start up a new line, which it might be, you still can't magically turn money into ships in a day. Even old container ships are extremely expensive now, there are simply not enough yards to build ships fast enough. Whatever the debt is, CCL already does have the ships to meet a higher demand, and I'm not sure that is fully shown in the figures. Have to stay optimistic when I bought CCL at $15 and was happy about it 🙂

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3 hours ago, rkacruiser said:

I seriously doubt that we will see CCL at zero.  Morgan Stanley's analyst has been very negative about CCL for quite some time.

 

And this is what's so crazy about Wall Street. One analyst from one company says CCL is potentially in trouble, and it spooks the entire stock market; everyone sells, and the stock tanks. Because of one analyst. Sheesh.

 

It's like when a company reports goods earnings and future forecast, but misses "analyst projections" — a handful of analysts missed on their (educated) guesses, but the markets essentially side with the analysts and punish the company's stock price for "missing expectations." Forget that the company turned a nice profit, and that the company presented a projection for additional profits ahead. But because the profit amount is lower than some analysts incorrectly projected, the stock price is punished. Ugh, it makes me pull me hair out!

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1 minute ago, cruiseej said:

Ugh, it makes me pull me hair out!

 

I don't recommend that.  All though it does make shampooing what hair remains much quicker.  😀

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14 minutes ago, cruiseej said:

 

And this is what's so crazy about Wall Street. One analyst from one company says CCL is potentially in trouble, and it spooks the entire stock market; everyone sells, and the stock tanks. Because of one analyst. Sheesh.

 

It's like when a company reports goods earnings and future forecast, but misses "analyst projections" — a handful of analysts missed on their (educated) guesses, but the markets essentially side with the analysts and punish the company's stock price for "missing expectations." Forget that the company turned a nice profit, and that the company presented a projection for additional profits ahead. But because the profit amount is lower than some analysts incorrectly projected, the stock price is punished. Ugh, it makes me pull me hair out!

If you think you know more than the analysts, and I sometimes think I do, this situation presents you with buying opportunities.

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12 hours ago, turtlemichael said:

If you think you know more than the analysts, and I sometimes think I do, this situation presents you with buying opportunities.

 

Want some more "buying opportunities"??  See below for the latest from the Wall Street financial experts.  

 

From the Wall Street Journal early morning today, below is the chart for Carnival.  Not only was yesterday bad for this major cruise stocks, but it has affected all three companies.  

 

Down, down has been the trend for the past two days.  A new 52-week low for Carnival.  Ready to get out your checkbook and buy, buy, buy??

 

THANKS!  Enjoy!  Terry in Ohio

 

image.thumb.png.928ae01d0beeef960742dcd7ebeca798.png

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Sorry to bring more cruise stock bad news.  From the Wall Street Journal's sister publication of Barron's this morning, they had this headline: These Cruise Stocks Are the S&P 500’s Worst Performers in the Second Quarter with these highlights:The stock market close Thursday will wrap up the second quarter of 2022 —and what a quarter it has been.  A lot has happened between April and June. Notably, markets have been thrown into disarray as the Federal Reserve — in its battle to cool rising inflation — raised interest rates by the most since 1994, fueling fears that its aggressive policy could lead to a recession.

 

Their story, which is hard to reach behind their tight paywall, specifically cited Carnival and Royal Caribbean falling stock values.  Is now a great buying opportunity?  Or, could and will these stock values go lower?  But, hopefully not down to zero?? 

 

Full story at:

https://www.barrons.com/articles/worst-stocks-royal-caribbean-carnival-netflix-51656602608

 

THANKS!  Enjoy!  Terry in Ohio

 

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2 hours ago, TLCOhio said:

Notably, markets have been thrown into disarray as the Federal Reserve — in its battle to cool rising inflation — raised interest rates by the most since 1994, fueling fears that its aggressive policy could lead to a recession

 

People are not stupid, they see rising prices, or less product in the same box of detergents, too. I wish the European Central Bank got to its senses, too, and do what a central bank is supposed to do. Fight inflation instead of trying to diminish debt of countries that can't behave (Spain, Italy, Greece, France, to name a few). 

 

Ships are ships. They get older, but don't inflate. Even FR can't use a helicopter to spray around ships for all lines. You don't have only 90% ship left after a year because FR printed too many ships. I have full confidence that the fact that CCL actually owns a large fleet will keep them adrift, and inflation eats away the debts, but let's hope that's not wishful thinking 🙂

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22 hours ago, cruiseej said:

And this is what's so crazy about Wall Street. One analyst from one company says CCL is potentially in trouble, and it spooks the entire stock market; everyone sells, and the stock tanks. Because of one analyst. Sheesh.

 

Not only that. Windows 10 has learned that I'm interested in CCL so now I only need to click on the weather icon in the task bar to see what the analysts say. If CCL went down they'll explain why it did and see a dire future for CCL. If CCL went up the very same people explain why it did and see a wonderful future for CCL. Never an expert who says the market has it all wrong (of course, "the market is always right", by definition, but they are forecasting what the market will say tomorrow).

 

Never an expert who admits that he was wrong the last time, who found a mistake, explains it, and promises to make better forecasts next time. Really, "if you're so smart, why aren't you rich". The fact that they deliver analysis, paid by the hour or number of words, proves that they are the homeopaths of stock exchanges. 

 

There are two famous stories which I believe are both true, and which enough people don't want to be true because a whole industry is useless if they are.

1) a blindfolded monkey picking stocks better than the experts,

2) a few elderly ladies investing in companies based on personal experiences instead of looking at balances, doing better than the monkey

 

So probably, if the market reacts to an analyst, who's worse than a monkey, you should probably do the opposite of what he advises.  In the end it's real dividends the company can pay that counts (besides some OBC), but thanks to the analyst you can get those cheaper when people believe in the magic glass ball of the analyst.

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19 hours ago, AmazedByCruising said:

People are not stupid, they see rising prices, or less product in the same box of detergents, too. I wish the European Central Bank got to its senses, too, and do what a central bank is supposed to do. Fight inflation instead of trying to diminish debt of countries that can't behave (Spain, Italy, Greece, France, to name a few). Ships are ships. They get older, but don't inflate. I have full confidence that the fact that CCL actually owns a large fleet will keep them adrift, and inflation eats away the debts, but let's hope that's not wishful thinking 🙂

 

Appreciate these very good insights, comments and follow-ups from our travel friend in Europe/Holland.  Good points about certain of the central bankers having missed many key issues affecting finances.  And, how ship "values" do not inflate up over time.  

 

From MSN News and this financial website this morning, they had this headline: Why Cruise Line Stocks Were Sinking This Week with these highlights: “One of the industries that was hit the hardest by the coronavirus pandemic was a real downer this week too. Following a  dark analyst note regarding Carnival in particular, all three of the major cruise industry stocks have been hammered over the past few trading days.  S&P Global Market Intelligence data reveals that Carnival, Norwegian Cruise Line Holdings, and Royal Caribbean had all declined by double-digit percentages week to date before the opening bell Friday.   Although it wasn't the only catalyst contributing to cruise stocks' plunge, a new analysis from investment bank Morgan Stanley laid out a grim scenario for Carnival. Analyst Jamie Rollo made fairly deep cuts to his revenue forecast for the second half of this year, and to his price target on the stock.   Of greater concern was Rollo's new worst-case scenario, in which he speculated that if a new shock to cruise demand -- like the onset of the pandemic -- occurs in the coming months, the value of Carnival stock could plunge to $0.

 

Here is more from this analysis: "Since the key factors behind the analyst's very bearish take on Carnival apply to the company's peers, Norwegian and Royal Caribbean stocks plunged as well.  Compounding that for Norwegian, two investment banks published fresh research notes on the cruise operator. Barclays initiated coverage on it with an equal-weight (i.e., neutral) recommendation, while Citigroup lowered its price target on the stock to $13 per share from the previous $18 while maintaining its neutral rating."

 

Full story at:

https://www.msn.com/en-us/money/topstocks/why-cruise-line-stocks-were-sinking-this-week/ar-AAZ4FCx

 

THANKS!  Enjoy!  Terry in Ohio

 

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From the Wall Street Journal this morning, below is a look at what the Royal Caribbean stock did during the first six months of 2022.  As you can see, it has been a general downhill slide.  Yesterday, RCL hit a 52-week low.  

 

Are you optimistic?  Is now the right time to buy?  Or will things sink lower in the coming weeks or months as the economy probably slides into a recession?  How confident do you feel in paying up fully for a cruise that will not be happening for six, twelve or eighteen months ahead?

 

THANKS!  Enjoy!  Terry in Ohio

 

image.thumb.png.677888b6daddc3a0887a5329805f70de.png

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18 minutes ago, TLCOhio said:

 

Appreciate these very good insights, comments and follow-ups from our travel friend in Europe/Holland.  Good points about certain of the central bankers having missed many key issues affecting finances.  And, how ship "values" do not inflate up over time.  

 

From MSN News and this financial website this morning, they had this headline: Why Cruise Line Stocks Were Sinking This Week with these highlights: “One of the industries that was hit the hardest by the coronavirus pandemic was a real downer this week too. Following a  dark analyst note regarding Carnival in particular, all three of the major cruise industry stocks have been hammered over the past few trading days.  S&P Global Market Intelligence data reveals that Carnival, Norwegian Cruise Line Holdings, and Royal Caribbean had all declined by double-digit percentages week to date before the opening bell Friday.   Although it wasn't the only catalyst contributing to cruise stocks' plunge, a new analysis from investment bank Morgan Stanley laid out a grim scenario for Carnival. Analyst Jamie Rollo made fairly deep cuts to his revenue forecast for the second half of this year, and to his price target on the stock.   Of greater concern was Rollo's new worst-case scenario, in which he speculated that if a new shock to cruise demand -- like the onset of the pandemic -- occurs in the coming months, the value of Carnival stock could plunge to $0.

 

Here is more from this analysis: "Since the key factors behind the analyst's very bearish take on Carnival apply to the company's peers, Norwegian and Royal Caribbean stocks plunged as well.  Compounding that for Norwegian, two investment banks published fresh research notes on the cruise operator. Barclays initiated coverage on it with an equal-weight (i.e., neutral) recommendation, while Citigroup lowered its price target on the stock to $13 per share from the previous $18 while maintaining its neutral rating."

 

Full story at:

https://www.msn.com/en-us/money/topstocks/why-cruise-line-stocks-were-sinking-this-week/ar-AAZ4FCx

 

THANKS!  Enjoy!  Terry in Ohio

 

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www.boards.cruisecritic.com/showthread.php?t=2511358

"And, how ship "values" do not inflate up over time"

I agree that used ships, like used cars, do not inflate in value. However, I would guess that inflation will cause the cost of building a new ship to become more expensive, which should have a trickle down effect on the value of used ships. Wouldn't it follow that existing fleets will have more value in an inflated economy?

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A "lightly used" ship available NOW, which can be used to generate revenue, is probably a smarter investment than putting that money into a new build. The latter will not generate cashflow until it's launched...and with delays, who knows when that will be?

 

Also, demand for cruising is high now. Who knows what it will be down the road? Make some money on your investment now.

 

Assuming of course, that you can find crew to staff it! So yeah, I'm not surprised that a quality used ship would be kind of a hot commodity now. No wonder there's a bidding war.

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4 hours ago, commodoredave said:

"And, how ship "values" do not inflate up over time"

I agree that used ships, like used cars, do not inflate in value. However, I would guess that inflation will cause the cost of building a new ship to become more expensive, which should have a trickle down effect on the value of used ships. Wouldn't it follow that existing fleets will have more value in an inflated economy?

 

That's what I mean 🙂. The lines with an existing fleet have ships that are scarce, and debts for which they pay less interest than inflation.

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6 hours ago, commodoredave said:

"And, how ship "values" do not inflate up over time"   I agree that used ships, like used cars, do not inflate in value. However, I would guess that inflation will cause the cost of building a new ship to become more expensive, which should have a trickle down effect on the value of used ships. Wouldn't it follow that existing fleets will have more value in an inflated economy?

 

Appreciate these great comments and follow-ups from our travel friends in Canada, New York and Holland..  

 

From the Wall Street Journal, below are the charts for the three main cruise lines during the past week.  Mostly negative on Tuesday through Thursday.  Then, stabilizing today.  What about for next week and rest of July after a negative first six months of 2022.  

 

THANKS!  Enjoy!  Terry in Ohio

 

From the Wall Street Journal late Friday afternoon, below are the financial value charts for Royal Caribbean and the other two major companies.:

(Open your screen/viewer wider to see these visuals larger/better!)

image.thumb.png.bf6d3d2e114bbd65c9ffa2148f453b10.png

 

image.thumb.png.55d69f02292509d3aa70fd912b653117.png

 

image.thumb.png.5f354101e6ff6b6a961c1a12c74b4e86.png

 

For the past 30 days, here has been the trend for Royal Caribbean.  Mostly downward?

image.thumb.png.9b4aae7ec5fa030887b4fc6e2d62da51.png

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22 hours ago, jpalbny said:

A "lightly used" ship available NOW, which can be used to generate revenue, is probably a smarter investment than putting that money into a new build. The latter will not generate cashflow until it's launched...and with delays, who knows when that will be?

 

Also, demand for cruising is high now. Who knows what it will be down the road? Make some money on your investment now.

 

Assuming of course, that you can find crew to staff it! So yeah, I'm not surprised that a quality used ship would be kind of a hot commodity now. No wonder there's a bidding war.

My thoughts exactly.  If the Crystal staff was guaranteed to come with it bids would probably be even higher. 😃

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From the respected Financial Times publication, they had this headline: Covid could not sink cruise lines — but they now face an iceberg of debt" with this sub-headline: "Passenger bookings have bounced back but the industry’s balance sheets are far from shipshape. 

 

Cute phrasing with "iceberg of debt" and "far from shipshape”???  Reactions?

 

Here are some of their reporting highlights:At one point in February 2020, a single cruise ship — the Diamond Princess — accounted for more than half of the world’s confirmed cases of Covid-19 outside China. The 3,700 passengers and crew endured a grim quarantine off Japan; seven died.  But Covid has not proved to be an existential threat for the industry. Bookings have surged to pre-pandemic levels. 'Everybody you speak to on cruises nowadays says: ‘Gee, it’s good to be back home, it’s good to be back on the seas again,' ' said Mike Alcock, a 72-year-old retiree from Northamptonshire, who has taken six cruises alongside his wife since the industry returned from the pandemic and has three more booked.  'You wouldn’t go to a hotel that’s as spotlessly clean,' said Alcock, who has so much confidence in the industry’s ability to rebound from the pandemic, he just purchased 500 more Carnival shares.

 

BUT, here is more from their analysis: "What could sink many of the industry’s biggest companies is something else entirely: huge icebergs of debt. As cruise ships were moored in docks during the pandemic, the companies that owned them turned to the debt markets in a desperate attempt to stay afloat.  The three major listed cruise companies — which between them control four-fifths of the industry — have all more than doubled their gross debt over the past two years. Consequently, the markets are viewing the companies with caution, even as customers clamour to get back on board.  This week Carnival’s share price plunged 14 per cent after Morgan Stanley downgraded the stock.  Both Carnival and Royal Caribbean rank among the top five losers on the S&P 500 over the past three months."

 

Full story at:

https://www.ft.com/content/7a486b7b-e92f-47b7-a6bd-9da9637b42ac

 

THANKS!  Enjoy!  Terry in Ohio

 

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7 minutes ago, highplanesdrifters said:

My thoughts exactly.  If the Crystal staff was guaranteed to come with it bids would probably be even higher. 😃

 

Agree 100% with highplanesdrifters and J.P. regarding their wise comments and insights.  My guess is that many of the very good Crystal staff have "moved on" in finding other cruise jobs and/or taking positions in their home areas.  

 

Who can wait till a maybe/hoped Crystal restart in late 2023 or for early 2024.  We remember great staff members from Silversea and Crystal sailings, but they will not, sadly, all be back and available.  Lots of staff turn-over and changes during the past two-to-three challenging years.  

 

THANKS!  Enjoy!  Terry in Ohio

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Posted (edited)
On 7/1/2022 at 8:29 AM, jpalbny said:

A "lightly used" ship available NOW, which can be used to generate revenue, is probably a smarter investment than putting that money into a new build. The latter will not generate cashflow until it's launched...and with delays, who knows when that will be?

 

Also, demand for cruising is high now. Who knows what it will be down the road? Make some money on your investment now.

 

Assuming of course, that you can find crew to staff it! So yeah, I'm not surprised that a quality used ship would be kind of a hot commodity now. No wonder there's a bidding war.

 

And this is why I am not surprised that the beautiful expedition ship Crystal Endeavor (less than a year old) was quickly purchased by SS, to become the SS Endeavor, likely starting with the 2023/24 winter season (or so we hope -- we loved that ship around Iceland in 2021, though of course much of the joy was due to the stellar chef, other excellent Crystal staff who are now scattered to the winds ,  and the breathtaking scenery).  

A&K also bought the roughly double-decade old Crystal Symphony and Crystal Serenity, to squeeze a little more out of them in their last years as A&K gets footing in the cruise industry -- a ship in the hand is worth two in the shipyard.. 

 

Every quality line  is competing for good staff too, so excellent Crystal staff have found homes either on other lines (some have appeared on Seabourn) or on land. The bidding war may extend  (or likely has already shifted) from the price on old ships  to the price for new staff contracts -- costs which of course will be passed on to customers, perhaps sooner than the increased fuel costs for cruising.

 

The origins of staff on ships may also start shifting, e.g., on the luxury German line, Hapag Lloyd, on a recent cruise,  I noticed that many  of the German and EU staff in the dining rooms have disappeared, and have been replaced by staff from Tunisia and other countries where the cost of living is lower and workers will more likely be satisfied with the wages they earn  on cruise lines today. 

 

 

 

 

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Cruising will not to a return to a semblance of normal until both guests and crew no longer are required to wear a mask.  It's my understanding that is one of the issues in trying to get crew to return to the ships.  Working, particularly in warm/hot/humid climates, and having to wear a mask?  Has to be most unpleasant for much of the crew.  

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On 7/2/2022 at 4:18 PM, rkacruiser said:

Cruising will not to a return to a semblance of normal until both guests and crew no longer are required to wear a mask.  It's my understanding that is one of the issues in trying to get crew to return to the ships.  Working, particularly in warm/hot/humid climates, and having to wear a mask?  Has to be most unpleasant for much of the crew.  

 

Agree that masks can been an issue for both passengers . . . AND staff.  Returning to "normal" is not easy, quick and simple.  Appreciate these very good comments and follow-ups above from Catlover54, Mr. Luxury and our SW Ohio neighbor.    

 

From a financial news/analysis website this morning, they had this headline: Royal Caribbean: Diligently Navigating Their Comeback with these summary highlights: “Shares are trading near levels not seen since March of 2020 despite a satisfactory return to most operations.  While key fundamentals are yet to recover, numerous catalysts are poised to place future earnings well above their pre-Covid levels.
Risks such as Covid, inflation, and rising fuel costs are also being handled quite well.  Technical strength points to a short-term rebound that will eventually have fundamental strength continuing an appreciation in share prices.”

 

Additional background cited: "Since the beginning of 2021, five impressive ships have been added to the, now, 100% operating fleet. Given every market in which it operates, except China, is now open for cruising, Royal Caribbean intends to take full advantage of its ship-building abilities with the planned addition of 10 vessels. These additional ships, including a new "Icon Class" that's expected to perform alongside its largest ships in terms of size, are intended to add to the now-positive operating cash flow. The continued fleet expansion signals not only the additional demand that the company is facing from vacationers but the certainty among management that such investments are worthwhile."

 

All of these items cited are true, but how does the currently downward shifting economy affect consumers, plus the impacts of higher fuel costs, inflation and interest rate hikes impact future financial realities for customers and these three major cruise companies?

 

Lots of questions??  Who has the answers?

 

Full story at:

https://seekingalpha.com/article/4521710-royal-caribbean-stock-diligently-navigating-their-comeback

 

THANKS!  Enjoy!  Terry in Ohio

 

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In the interest of "fairness" and balance, here is a more optimistic summary/view for a more positive cruise stock future.  True?  

 

From this financial website this morning, they had this headline: 5 Reasons to Climb Aboard Carnival Stock" with this sub-headline: "The cruise industry has a secret weapon—major pent-up travel demand. This combined with the following five forces should keep the wind at Carnival's sails regardless of how choppy the economic factors.

 

Here are some their story/analysis highlights:#1 - Easing Pandemic Restrictions: Government guidelines around Covid-19 vaccination and testing as they pertain to cruise lines have eased in the U.S. and Canada. When you run North America's most popular cruise brand as Carnival does, this is very welcomed news.  #2 - Road Trips are Expensive: With gasoline prices at historically high levels near $5 a gallon, the notion of taking a cross-country road trip is less appealing these days.  #3 - Fleet Operations, Occupancy are Trending Higher: Due to the fluid nature of the pandemic, Carnival appropriately took a cautious approach to bringing its ships back online even with demand clearly on its side.  #4 - Carnival is Recession-Resilient: To say the cruise industry is recession-proof may be a stretch since an economic downturn would undoubtedly cause some consumers to wipe lavish getaways from the budget. However, to call it recession-resilient is reasonable.  #5 - The Stock is Cheap: Although a recession and higher fuel and wage costs are legitimate concerns for Carnival, there are several factors that point to a sustainable recovery. And with strong demand as the powerful force atop the list, long-term profitability should trend upward.

 

Ready to buy Carnival stock?  Is it a good, solid investment?

 

Full story at:

https://www.entrepreneur.com/article/430776

 

THANKS!  Enjoy!  Terry in Ohio

 

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