IMF Warns Of ‘Gloomy Outlook’ For Global Economy, Slashing Growth Estimates

The International Monetary Fund warned on Tuesday of a slowdown in global economic growth as the world economy continues to take a hit from “increasingly gloomy developments in 2022,” including high inflation, a slowdown in China caused by Covid lockdowns and ongoing fallout from Russia’s war in Ukraine.

The IMF slashed its global growth projections, now expecting global GDP to grow 3.2% this year and 2.9% in 2023, down from previous estimates in April of 3.6% GDP growth for both years.

The group cited a slowdown in the world’s three largest economies—the United States, China and the euro area—as a reason for the revised estimates, warning that the risks to the outlook remain “overwhelmingly tilted to the downside.”

Several “shocks” have hit the global economy as it tries to recover from the pandemic, including higher-than-expected inflation worldwide––especially in the United States and Europe, a worse-than-anticipated slowdown in China caused by Covid lockdowns and “further negative spillovers” from the war in Ukraine.

The IMF also said that high inflation remains a “major problem” as prices have continued to rise in 2022, led by soaring food and fuel costs, arguing that “taming inflation should be the first priority for policymakers” worldwide.

The group now expects global inflation to hit 6.6% in advanced economies and 9.5% in developing economies this year, though prices are expected to return to near pre-pandemic levels by the end of 2024.

The IMF also slashed its growth estimates for the U.S. economy, now forecasting GDP to rise 2.3% this year and 1% in 2023, down from previous estimates of 3.7% and 2.3%, respectively, amid the impact of tighter monetary policy and reduced household purchasing power.

“The outlook has darkened significantly since April,” IMF chief economist Pierre-Olivier Gourinchas said in a statement. “The world may soon be teetering on the edge of a global recession, only two years after the last one.”

“The slowdown in China has global consequences,” the IMF said. “Lockdowns added to global supply chain disruptions and the decline in domestic spending are reducing demand for goods and services from China’s trade partners.” The group now sees China’s economy growing 3.3% in 2022—its lowest pace in four decades and down over 1% from previous estimates.

The World Bank similarly slashed its forecasts for the global economy last month, predicting GDP growth in 2022 of just 2.9%, down from an earlier estimate of 4.1%.

I am a senior reporter at Forbes covering markets and business news. Previously, I worked on the wealth team at Forbes covering billionaires and their wealth.

Source: IMF Warns Of ‘Gloomy Outlook’ For Global Economy, Slashing Growth Estimates

Critics by Pierre-Olivier Gourinchas

The global economy, still reeling from the pandemic and Russia’s invasion of Ukraine, is facing an increasingly gloomy and uncertain outlook. Many of the downside risks flagged in our April World Economic Outlook have begun to materialize. Higher-than-expected inflation, especially in the United States and major European economies, is triggering a tightening of global financial conditions.

China’s slowdown has been worse than anticipated amid COVID-19 outbreaks and lockdowns, and there have been further negative spillovers from the war in Ukraine. As a result, global output contracted in the second quarter of this year. Under our baseline forecast, growth slows from last year’s 6.1 percent to 3.2 percent this year and 2.9 percent next year, downgrades of 0.4 and 0.7 percentage points from April.

This reflects stalling growth in the world’s three largest economies—the United States, China and the euro area—with important consequences for the global outlook. In the United States, reduced household purchasing power and tighter monetary policy will drive growth down to 2.3 percent this year and 1 percent next year.

In China, further lockdowns, and the deepening real estate crisis pushed growth down to 3.3 percent this year—the slowest in more than four decades, excluding the pandemic. And in the euro area, growth is revised down to 2.6 percent this year and 1.2 percent in 2023, reflecting spillovers from the war in Ukraine and tighter monetary policy.

Despite slowing activity, global inflation has been revised up, in part due to rising food and energy prices. Inflation this year is anticipated to reach 6.6 percent in advanced economies and 9.5 percent in emerging market and developing economies—upward revisions of 0.9 and 0.8 percentage points respectively—and is projected to remain elevated longer. Inflation has also broadened in many economies, reflecting the impact of cost pressures from disrupted supply chains and historically tight labor markets.

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A Recession is Now The Base Case Scenario For Wells Fargo

Wells Fargo slashed its economic outlook this week, with a year-end recession now the bank’s base case scenario as the Federal Reserve moves to tame red-hot inflation.

In an updated forecast, Wells Fargo cuts its 2022 GDP growth target to 1.5%, down from 2.2%, and slashed its 2023 target to a decline of 0.5%. The bank had previously predicted that gross domestic product, the broadest measure of goods and services produced in a nation, would expand by 0.4% next year.

Overall, Wells Fargo expects a total peak-to-trough contraction of 1.3% across three quarters. By comparison, the economy shrunk 10% during the very brief, but sharp, pandemic-induced recession in 2020. During the 2008 financial crisis, the economy fell by 3.8%.

In making the new projection, Wells Fargo noted that “consumer activity has weakened” considerably as the economy confronts new COVID-19 outbreaks and restrictions, sky-high inflation and a strong U.S. dollar, in addition to the Russian war in Ukraine and aggressive Fed monetary policy.

Economic growth in the U.S. is already slowing. The Bureau of Labor Statistics reported earlier this month that gross domestic product unexpectedly shrank in the first quarter of the year, marking the worst performance since the spring of 2020, when the economy was still deep in the throes of the COVID-induced recession.

Wells Fargo is not alone in its gloomy economic outlook; there are growing fears on Wall Street that the Fed may inadvertently trigger a recession with its war on inflation, which climbed by 8.3% in April, near a 40-year high. Other firms forecasting a downturn in the next two years include Bank of America, Fannie Mae and Deutsche Bank.

Fed policymakers already raised the benchmark interest rate by 50 basis points earlier this month for the first time in two decades and have signaled that more, similarly sized rate hikes are on the table at coming meetings as they rush to catch up with inflation. Chairman Jerome Powell recently pledged that officials will “keep pushing” until inflation falls closer to the Fed’s 2% target.

Still, he has acknowledged there could be some “pain associated” with reducing inflation and curbing demand but pushed back against the notion of an impending recession, identifying the labor market and strong consumer spending as bright spots in the economy. Still, he has warned that a soft landing is not assured. 

“It’s going to be a challenging task, and it’s been made more challenging in the last couple of months because of global events,” Powell said Wednesday during a Wall Street Journal live event, referring to the Ukraine war and COVID lockdowns in China.

But he added that “there are a number of plausible paths to having a soft or soft-ish landing. Our job isn’t to handicap the odds, it’s to try to achieve that.”

Source: A recession is now the base case scenario for Wells Fargo | Fox Business

Wells Fargo & Co. clients are coping well with inflation and rising interest rates, which hasn’t yet stressed business at the bank, according to Chief Financial Officer Mike Santomassimo.

“So far, so good,” he said Thursday in a Bloomberg Television interview. “Clients come into this both on the consumer side and the corporate side in a much better position than they would have in other rising-rate environments.”

Wells Fargo reported first-quarter results earlier in the day, missing Wall Street estimates on revenue and expenses. Non-interest expenses were $13.9 billion, higher than what analysts had forecast. Revenue declined, bringing net income down to $3.7 billion, the San Francisco-based lender said in a statement

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Stock Market Outlook: Bear Rally Conditions Not Sustainable, MS CIO Says

  • Lisa Shalett, the CIO of wealth management at Morgan Stanley, said in a note last week that stock investors have been too optimistic.
  • She argued that recent strength in stocks may be a bear-market rally driven by “wishful thinking” and excess liquidity.
  • Shalett laid out three risks, including Fed policy tightening, higher rates, and macroeconomic headwinds.

Investors should be wary of stock-market stability off recent lows, says the CIO for Morgan Stanley’s wealth management division.

“Recent strength in the equities market may be nothing more than a bear-market rally, fueled by wishful thinking and excess liquidity,” Lisa Shalett wrote in a recent report.

Despite a rocky week, global stock indexes are still up markedly from recent lows, with the S&P 500 and tech-heavy Nasdaq 100 having gained more than 3% over the past month. But both benchmarks are still down big on the year as investors have grappled with sky-high inflation, rocketing commodity prices, and a series of rapid US rate increases.

Shallett said the gains seen so far in April were down to investors hoping the Federal Reserve would engineer a “soft landing” by raising rates quickly enough to cool inflation but without sending the economy into a recession.

The Fed raised interest rates in March for the first time since 2018, taking a big step to tame inflation at its highest for 40 years in the US, and planned a series of at least six more hikes this year. Markets are pricing in expectations for a 50-basis point hike from the Fed’s next meeting in May and possibly more at subsequent meetings.

The Fed is also expected to shrink its balance sheet by $95 billion a month, according to its most recent meeting minutes. Futures markets show investors believe US rates could be as high as 2.75% by the end of this year, compared with 0.5% right now.

Shalett said she disagrees with the view that investors seem to hold that the Fed hiking interest rates wouldn’t affect stock valuations, and were ignoring macroeconomic risks from the Russia-Ukraine war and slowing growth.

“Morgan Stanley’s Global Investment Committee disagrees with these sanguine views and believes some of the more cautious signals coming from the bond market may better reflect the likely path ahead,” she said.

For starters, she said the Fed is expected to raise rates more times than market expected three months ago and would cut billions more a month than expected from its asset holdings.

“Such aggressive tightening will make the Fed’s policy execution highly complex, and historical examples suggest that even when the central bank does manage to land the economy softly, markets often feel a much harder impact,” she said.

In her opinion, investors are underestimating the potential hit to the stock market from a series of rapid rate rises and the effect those have on the underlying economy.

“This may be wishful thinking. We believe the Fed is apt to tighten policy more than many investors expect, impacting real rates and valuations as a result,” she said.

Lastly, Shalett said input costs, including wages, are still rising for companies, US growth will slow and there is a real risk of recession in Europe stemming from Russia’s war in Ukraine, especially if the single currency bloc halts imports of Russian energy.

With all that in mind, the double-digit gains of 2020 and 2021 will be harder to pull off, she said.  “As financial conditions tighten, a strong but slowing economy is unlikely to be enough to power substantial passive index gains from here,” she said.

Yields will rise for two reasons: (1) more potential renters than landlords and (2) house prices will fall. So, over the coming period we will see higher rents and lower house prices leading to higher rental yields and ultimately a huge investment opportunity.

The Chinese stock market has, since the credit crisis started, lost 50% of its value, much more than the developed world’s markets but the difference is that we consider that China’s stock market is still a primary bull market. Accordingly, we cautiously sit on the sidelines waiting for the best opportunity to buy it.

By:

Source: Stock Market Outlook: Bear Rally Conditions Not Sustainable, MS CIO Says

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China Cuts Key Rates, Steps up Monetary Stimulus to Boost Economy

SHANGHAI (Reuters) -China lowered mortgage lending benchmark rates on Thursday as monetary authorities step up efforts to prop up the slowing economy, after data earlier in the week pointed to a darkening outlook for the country’s troubled property sector.

The cut to the one-year and five-year loan prime rates (LPR) followed surprise cuts by China’s central bank on Monday to its short- and medium-term lending rates, and came days after the central bank’s vice governor flagged more moves ahead.

With the property sector’s downturn seen persisting into 2022 and the fast-spreading Omicron variant dampening consumer activity, many analysts say those easing measures will be necessary, even as other major economies, including the United States, appear set to tighten monetary policy this year.

December economic data showed further weakening in consumption and the property sector, both major growth drivers.

At a monthly fixing on Thursday, China lowered its one-year loan prime rate (LPR) by 10 basis points to 3.70% from 3.80%. The five-year LPR was reduced by 5 basis points to 4.60% from 4.65%, its first cut since April 2020.

China’s central bank “should hurry up, make our operations forward-looking, move ahead of the market curve, and respond to the general concerns of the market in a timely manner,” People’s Bank of China Vice Governor Liu Guoqiang said on Tuesday, heightening market expectations for more stimulus.

All 43 participants in a snap Reuters poll had predicted a cut to the one-year LPR for a second straight month. Among them, 40 respondents also forecast a reduction in the five-year rate.

The cut to the 5-year rate suggested that “the Chinese authorities are keen to lower the cost of credit lending, so total credit growth is expected to rebound after the Spring Festival to ease the pressure on macro economy,” said Marco Sun, chief financial analyst at MUFG.

“China’s monetary policy still has some room for easing in the first half of this year, depending on the policy transmission effect and the growth target set by annual parliamentary meeting in March.”

Property firms’ shares and bonds jumped on Thursday following the LPR cut, as investors hoped it and other recent government measures would help to ease a funding squeeze in the sector that has seen a growing number of developers default on their debts.

Sheana Yue, China economist at Capital Economics, expects a further 20 bps cut to the one-year LPR in the first half of this year.

Interest rates on medium-term lending facilities (MLF) serve as a guide to the LPR. Market participants believe moves to the LPR should mimic adjustments to MLF rates.

Most new and outstanding loans in China are based on the one-year LPR. The five-year rate influences the pricing of mortgages.By:

Source: https://www.reuters.com

Read more stories at: https://money.usnews.com/

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Carnival Stock Remains Down 60% From Pre-Covid Highs. Is There An Opportunity?

Carnival stock (NYSE: CCL), the largest cruise line operator in the U.S., has seen its stock trail the market considerably this year declining by about 15% year-to-date. Moreover, unlike the broader S&P 500 which has actually gained over 35% from the pre-Covid highs seen in mid-February 2020, Carnival stock has lagged considerably, remaining down by about 58% from its pre-Covid levels.

The underperformance comes despite the gradual resumption of cruises since the summer and a relatively strong outlook for 2022, with the company noting that bookings for the second half of 2022 were ahead of pre-pandemic levels. Carnival has also indicated that it was likely to be cash-flow positive and profitable in 2022.

So is there an opportunity here for investors? While Carnival’s depressed stock price and strong bookings for next year are positives, we think that the trajectory of the Covid-19 pandemic will continue to cloud the company’s business in the near term. Covid-19 is also proving much harder to contain than initially expected. A more infectious new strain of the coronavirus, called Omicron, has been identified recently and there are concerns that this could potentially render Covid-19 vaccines less effective.

The cruising industry remains particularly vulnerable, given that it involves keeping people together in semi-confined spaces for days. For instance, around 17 Covid-19 cases were detected on one of Carnival’s rivals, Norwegian cruise ships, that departed from New Orleans. Besides the uncertainty relating to the pandemic, Carnival’s high leverage also remains a concern. The company’s long-term debt stood at $28 billion as of the end of Q3 2021, up from $9.7 billion at the end of 2019.

While CCL stock has seen lower levels during the current Covid-19 crisis, how did it fare in the 2008 crisis? Our analysis on CCL 2008 vs Now compares CCL’s performance over the 2008 financial crisis versus the Covid-19 crisis.

What Lies Ahead For Carnival Stock As Concerning New Covid Strain Emerges

Cruiseline stocks saw a big sell-off on Friday, as the World Health Organization designated a new strain of the novel coronavirus that was first identified in southern Africa as “a variant of concern.” Carnival stock (NYSE: CCL), the largest cruise line operator in the U.S., dropped almost 11% in Friday’s trading. Although it’s still early to tell if the strain is likely to cause another surge in Covid cases worldwide, hurting the cruising industry which is only slowly getting back to normal after remaining shut for over a year, investors in the cruise line space will need to be cautious.

The new virus variant, dubbed Omicron, has many more mutations and is apparently more transmissible, and is also believed to pose a higher risk of reinfection versus the Delta variant of the virus, which is currently the dominant strain worldwide. It’s also not yet clear whether the current crop of Covid-19 vaccines will be as effective against the variant.

Now, Carnival has been looking forward to a solid 2022, recently noting that bookings for the second half of the next year was ahead of pre-pandemic levels, while guiding that it was likely to be cash-flow positive and profitable in 2022. However, if the new variant drives another Covid wave or shows signs of evading vaccines, it clearly won’t be smooth sailing for Carnival and the broader cruising industry. Moreover, Carnival also has much more leverage on its books versus when the first wave of Covid-19 hit in March 2020, meaning that the financial risks could be more notable this time around. For perspective, Carnival’s long-term debt stood at $28 billion as of the end of Q3 2021, up from $9.7 billion at the end of 2019.

So, is CCL stock set to decline further in the near term or will it rise? We believe that there is a 53% chance of a rise in Carnival stock over the next month (21 trading days) based on our machine learning analysis of trends in the stock price over the last ten years. See our analysis on Carnival Stock Chance of Rise for more details.

What’s New With Carnival Stock?

Carnival stock (NYSE: CCL), the largest cruise line operator in the U.S., has seen its stock decline by almost 9% over the past week (five trading days), compared to the broader S&P 500, which remained roughly flat over the same period. Now there hasn’t been too much news specific to Carnival over the past few days. However, investors were seemingly disposed to booking some profit in the stock after it saw a bit of a rally in recent weeks following its better than expected outlook provided toward the end of October, indicating that it expects to be cash-flow positive and profitable in 2022.

Moreover, positive news on the anti-viral treatment for Covid-19 from Pfizer also appears to have helped cruising stocks. That said, investors are also probably concerned about the company’s high debt load, which could limit returns for shareholders in the longer term. For perspective, Carnival’s long-term debt stood at $28 billion as of the end of the third quarter, up from $9.7 billion at the end of 2019.

Now, is CCL stock set to decline further or will it rise? We believe that there is a decent 68% chance of a rise in Carnival stock over the next month (21 trading days) based on our machine learning analysis of trends in the stock price over the last ten years. See our analysis on Carnival Stock Chance of Rise for more details.

Five Days: CCL -9%, vs. S&P 500 -0.3%; Underperformed market

(4% event probability)

  • Carnival stock declined 9% over a five-day trading period ending 11/15/2021, compared to the broader market (S&P500) which remained roughly flat over the same period.
  • A change of -9% or more over five trading days has a 4% event probability, which has occurred 104 times out of 2516 in the last ten years.

Ten Days: CCL -3.3%, vs. S&P 500 1.6%; Underperformed market

(26% event probability)

  • Carnival stock declined 3.3% over the last ten trading days (two weeks), compared to the broader market (S&P500) which rose by 1.6%.
  • A change of -3.3% or more over ten trading days has a 26% event probability, which has occurred 642 times out of 2516 in the last ten years.

Twenty-One Days: CCL -5.8%, vs. S&P 500 4.8%; Underperformed market

(18% event probability)

  • Carnival stock declined 5.8% over the last twenty-one trading days (about one month), compared to the broader market (S&P500) which rose by 4.8%
  • A change of -5.8% or more over twenty-one trading days has an 18% event probability, which has occurred 455 times out of 2516 in the last ten years.

While CCL stock has seen lower levels during the current Covid-19 crisis, how did it fare in the 2008 crisis? Our analysis on CCL 2008 vs Now compares CCL’s performance over the 2008 financial crisis versus the Covid-19 crisis.

Up Over 80% From Covid Lows, Is Carnival Stock A Buy?

Carnival stock (NYSE: CCL), the largest cruise line operator in the U.S., has seen its stock decline by almost 16% over the past month (about 21 trading days), compared to the broader S&P 500, which gained about 3% over the same period. The recent decline comes due to a wider than expected Q3 loss, a revised price target on the stock by a brokerage firm, and some weakness in the broader travel space amid headwinds to the Chinese economy.

That said, things are slowing, but surely looking up for the leisure cruising industry, which bore the brunt of the Covid-19 pandemic. Carnival resumed sailing from U.S. ports in July and is likely to have about 50% of its fleet in revenue operations by the end of this month. Demand is also likely to look up, with Covid-19 infections in the U.S. trending steadily lower, after seeing a big surge through the summer. Carnival has also indicated that bookings for the second half of 2022 were ahead of pre-pandemic levels.

So is Carnival stock a buy at current levels? While Carnival stock has gained about 83% from its March 2020 lows, it has underperformed the S&P 500, which has roughly doubled over the same period. Moreover, at the current market price of about $22 per share, the stock still trades at about 50% below its pre-Covid highs of about $44 per share. That said, investors need to account for higher levels of risk versus pre-Covid, given the company’s total debt has increased from roughly $9 billion in 2017 to close to $31 billion currently.

The company is also seeing higher interest costs and this could weigh on profitability in the future. Moreover, with a 100% containment of Covid-19 looking unlikely and new mutations of the virus remaining a threat, there could be some revenue risk for cruise line operators, including Carnival, in the medium term.

While CCL stock has seen lower levels during the current Covid-19 crisis, how did it fare in the 2008 crisis? Our analysis on CCL 2008 vs Now compares CCL’s performance over the 2008 financial crisis versus the Covid-19 crisis.

Is Carnival Stock A Buy At $22?

We believe that Carnival stock (NYSE: CCL), the largest U.S. cruise operator, looks like a reasonably good buying opportunity at current levels. CCL stock trades near $22 presently and it is, in fact, down 55% from its pre-Covid levels of around $51 per share at the end of December 2020 – before the coronavirus pandemic hit the world. The stock recovered considerably over the first few months of this year, as growing vaccination rates and the company’s plans to resume sailing caused investors to get more optimistic about Carnival’s prospects.

However, the stock declined by almost 30% since early June as the spread of the highly infectious delta variant of the coronavirus and the recent surge in U.S. infections have hurt the near-term outlook for the cruising industry. But now that the stock has corrected meaningfully to accommodate the slower than expected near-term recovery, we believe that CCL stock looks quite attractive at the current levels of around $22 per share.

While CCL stock has seen lower levels during the current Covid-19 crisis, how did it fare in the 2008 crisis? In this note, we focus on a comparative analysis of CCL stock performance during the current financial crisis with that during the 2008 recession in our interactive dashboard.

Timeline of Coronovirus Crisis So Far:

  • 12/12/2019: Coronavirus cases first reported in China
  • 1/31/2020: WHO declares a global health emergency.
  • 2/19/2020: Signs of effective containment in China and hopes of monetary easing by major central banks helps the S&P 500 reach a record high.
  • 3/23/2020: S&P 500 drops 34% from the peak level seen on Feb 19, 2020, as COVID-19 cases accelerate outside China. Doesn’t help that oil prices crash in mid-March amid Saudi-led price war
  • Since 3/24/2020: S&P 500 recovers 97% from the lows seen on Mar 23, 2020, as the Fed’s multi-billion dollar stimulus package suppresses near-term survival anxiety and infuses liquidity into the system.
  • 8/19/2021: Around 60% of the U.S. population has received at least one dose of the Covid-19 vaccine, while 51% of the population is fully vaccinated.

In contrast, here is how CCL stock and the broader market fared during the 2007-08 crisis

Timeline of 2007-08 Crisis

  • 10/1/2007: Approximate pre-crisis peak in S&P 500 index
  • 9/1/2008 – 10/1/2008: Accelerated market decline corresponding to Lehman bankruptcy filing (9/15/08)
  • 3/1/2009: Approximate bottoming out of S&P 500 index
  • 12/31/2009: Initial recovery to levels before accelerated decline (around 9/1/2008)

Carnival vs S&P 500 Performance Over 2007-08 Financial Crisis

CCL stock declined from levels of around $49 in October 2007 (the pre-crisis peak) to roughly $20 in March 2009 (as the markets bottomed out), implying that the stock lost as much as 60% of its value from its approximate pre-crisis peak. This marked a higher drop than the broader S&P, which fell by about 51%. However, CCL recovered strongly post the 2008 crisis to about $32 by the end of 2009 rising by 62% between March 2009 and January 2010. In comparison, the S&P bounced back by about 48% over the same period.

CCL Fundamentals In Recent Years Looked Good, But Present Situation Is Challenging

Carnival’s revenues rose from about $17.5 billion in FY’17 (fiscal years end November) to about $21 billion in FY’19, as demand for cruises increased. The company’s earnings also grew over the period, rising from around $3.70 per share to about $4.30 per share. However, the picture changed dramatically over FY’20, as revenues dropped to under $6 billion, with the company losing about $13 per share over the year. Although the company resumed sailing from U.S. ports in July, revenues are still expected to decline further in FY’21 to about $3 billion, per consensus estimates, as the spread of the more infectious delta variant of the virus likely causes some customers to hold back on cruising due to the recent resurgence of U.S. Covid cases.

Does CCL Have A Sufficient Cash Cushion To Meet Its Obligations Through The Coronavirus Crisis?

Carnival’s total debt has increased from roughly $9 billion in FY’17 to about $30 billion as of the last quarter, while its total cash increased from about $500 million to over $9 billion over the same period, as the company has raised funding to tide over the crisis. Although the company’s cash flows from operations grew marginally from $5.3 billion in FY’17 to $5.5 billion in 2019, the company burned over $6 billion in 2020 as operations were suspended through much of the year.

Monthly cash burn over the first half of 2021 also stood at about $500 million. Considering this, we think that Carnival’s cash cushion appears to be sufficient to keep the company going over the next several quarters, even if demand remains muted in the interim. However, the company’s higher interest costs could weigh on profitability through the post-Covid recovery period.

CONCLUSION

Phases of Covid-19 crisis:

  • Early- to mid-March 2020: Fear of the coronavirus outbreak spreading rapidly translates into reality, with the number of cases accelerating globally.
  • Late-March 2020 onward: Social distancing measures + lockdowns
  • April 2020: Fed stimulus suppresses near-term survival anxiety
  • May-June 2020: Recovery of demand, with the gradual lifting of lockdowns – no panic anymore despite a steady increase in the number of cases
  • Since late 2020: Weak quarterly results, but continued improvement in demand and progress with vaccine development buoy market sentiment. Multiple countries have undertaken large-scale vaccine programs for Covid-19, though new variants of coronavirus resulted in an uptick inactive cases.

Overall, we believe that CCL stock is likely to see higher levels going forward. Although FY’21 is also likely to remain a relatively muted year for the company, FY’22 is likely to be better. Although Covid-19 could linger, cruise line companies (and their passengers) will likely adapt to the new normal potentially requiring vaccines for passengers and staff, submissions of a negative coronavirus test, and mask-wearing in indoor spaces.

Carnival, along with its major rivals Royal Caribbean and Norwegian Cruise Line, have signaled robust demand for 2022, even factoring in higher prices for cruises. Consensus estimates point to sales of about $18 billion for 2022, almost approaching pre-Covid levels. With CCL stock remaining down by about 55% since late 2019, and demand slated to pick up, the risk to reward prospects for the stock are looking better, in our view.

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This might include you though you may have invested money in these companies, or may have been working with one of them for years as an employee, or have consulted with them as an expert for a long time. You can play with assumptions, or try scenarios, as-well-as ask questions to other users and experts. The platform uses extensive data to show in a single snapshot what drives the value of a company’s business. Trefis is currently used by hundreds of thousands of investors, company employees, and business professionals.

Source: Carnival Stock Remains Down 60% From Pre-Covid Highs. Is There An Opportunity?

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