Carnival Cruises (CCL) has announced that its cruise line, Princess Cruises, is selling two of its ships, Sun Princess and Sea Princess, to undisclosed buyers.
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The sale of these vessels is part of Carnival’s plan to accelerate the removal of less efficient ships from its fleet as the coronavirus pandemic continues to weigh on the company’s operations.
“While it is never easy to say goodbye to any ship in our fleet, this will allow us to deploy newer ships enhancing our offerings for Australia cruisers and focus on bringing into service exciting newbuilds like the upcoming delivery of Enchanted Princess” commented Princess Cruises president Jan Swartz.
The 2,000-guest Sun Princess was introduced in 1995 and was amongst the largest ships in the world at the time. It also helped CCL open the Japanese market in 2013 as the first foreign-flagged cruise ship to offer cruises designed specifically for the Japanese.
Princess Cruises will now cancel Sun Princess sailings from December 28, 2020 to August 14, 2021; and Sea Princess sailings from December 23, 2020 to November 9, 2021. Guests can either book another Princess Cruise when operations resume or receive a refund, said the company.
Shares in Carnival have plunged over 70% year-to-date, and the stock scores a cautious Hold consensus from the Street. Meanwhile the average analyst price target of $16 indicates only 13% upside potential from current levels.
Deutsche Bank’s Chris Woronka recently published a hold rating on CCL with a bearish $13 price target. According to Woronka, even if CCL recovers to 91% of prior peak (2019) EBITDA in 2023, assuming higher yields and a 220bps increase in margins, EPS will likely only total about 27% of the prior peak due to capital markets activities already completed in 2020.
“We remain squarely neutral on the cruise names… we continue to believe the Street is not fully appreciating the length of time that will likely be required to return to prior peak EBITDA levels, nor the magnitude that “full recovery” earnings have been impacted by capital markets activities to date (with more likely to come)” the analyst told investors on September 16. (See CCL’s stock analysis on TipRanks).
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