Poor show for Carnival as Coronavirus continues to wreak havoc

Leading cruise operator leads the long list of FTSE fallers as market opens

Article updated: 6 March 2020 10:00am Author: Joe Healey

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  • Leading cruise operator has been one of the hardest hit from Covid-19, with shares falling roughly 43% since the start of the year
  • News of another cruise liner, the Grand Princess, being stranded off San Francisco will only add fuel to the fire, which is reflected in Carnival’s share price which is down 5% this morning
  • As virus continues to spread, investors worry there are no signs of improvement on the horizon
  • Recommendation: It would be extremely risky for investors taking an entry point despite the shares deep value appeal. Therefore we maintain our ‘HOLD’ view.

Carnival, the world’s leading cruise operator, has suffered a massive hit to the share price as the market opens this morning. The consumer services sector in the UK (including industries such as travel and entertainment) have been the worst hit as Covid-19 continues to spread market panic. Carnival has been one of the biggest shocks to investors, seeing a rough 43% reduction in its share price YTD. There are no signs of this improving anytime soon either as the virus continues to spread. Carnival’s main market tends to be towards the elderly segment of the market looking to travel the world so, in light of media in recent weeks surrounding cruise ship quarantines, the future outlook for demand has been severely cast in doubt. This is alongside the possibility of having to suspend all Asian operations around the end of April.

News of another cruise ship, the Grand Princess, stranded off San Francisco will only add fuel to the fire as we can see in Carnival’s share price this morning which is down 5% currently. Until we start to see any certainty in relation to successfully combatting the virus it is likely markets will continue to slump.

Covid-19 continues to cause havoc on global markets as the uncertainty surrounding impacts to supply chains and travel become apparent. Although economic data has not shown much impact, it is likely this will start to feed through in upcoming releases with several cuts to global growth forecasts already announced. Despite governments efforts to support markets through cutting rates it is unlikely this will have a major impact considering the market’s sustained panic.

With shares so low, they may look like an opportunity for investors. However, we’d suggest actively monitoring the ongoing situation until progress becomes clearer. Considering the current downward momentum, it would be extremely risky for investors taking an entry point despite the shares deep value appeal. Therefore we maintain our ‘HOLD’ view.

Joe Healey

Investment Research Analyst

Following his completion of the graduate scheme, Joe is an Investment Research Analyst covering equities. He holds a BA Hons Business Management degree and is currently studying towards CFA Level II after passing CFA Level I in June 2019.

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