By Neal Rau
Shares of Carnival Corporation (NYSE:CCL) continue to slide after multiple analyst downgrades. The company said on Tuesday that its bookings for the next three quarters are below last year's pace, despite lower pricing. The company forecasts higher fuel prices will cut full-year 2013 earnings by 4 cents a share. However, the company is offering a new 110% guarantee in an attempt to win back business. With the stock trading near a 52-week low, is this finally the time to buy?
The company was able to realize a small profit during the first half of the year, despite the fact that its revenue declined. Carnival cut its profit forecast for the year in May, and in the second quarter, it slashed $81 million from its cruise pricing. The company stated earlier this year that the recovery will be gradual, and it will take two to three years for the Carnival brand to fully recover. Shares of Carnival are down about 7% over the last year and 27% from January 2011. According to the Stock Traders Daily real-time trading report, the stock is trading very close to long-term support, and near the 52 week low.
This recent earnings disappointment follows a string of disasters the world's biggest cruise ship operator ran into earlier.
· In January 2012, 32 people died when the Costa Concordia capsized off the coast of Italy.
· In February this year, 3000 passengers drifted in the Gulf of Mexico for five days, with sewage spilling into the hallways after the Carnival Triumph broke down.
· Then in March, the Carnival Dream suffered technical problems while docked at St. Maarten in the Caribbean.
Since then, the company has been busy trying to attract customers, and find ways to convince the potential guests that the nightmare vacation experiences others have endured are over. Carnival's super-refund is one way the company is trying to lure skeptical customers back onto its ships. Cruise companies already give full refunds when something goes seriously wrong on a ship, but Carnival is offering to take that a few steps further. The company announced a few weeks ago that guests departing before April 20, 2015, will be happy with their selected destination, or they can receive a 110% discount, plus transportation home and $100 in onboard credit. A guarantee like that might be enough to steer customers away from other cruise lines like Royal Caribbean Cruises Ltd. (NYSE: RCL) and The Walt Disney Company (NYSE:DIS).
The company, which runs cruises under 10 brands, including Costa, Cunard, Holland America and Princess, has a long way to go before its guests will arrive with peace of mind, knowing that they can relax and forget about their everyday problems. Over the past three years, passengers on cruise-ship operator Carnival's ships were the victim of 127 alleged crimes, passengers on Royal Caribbean Cruises alleged 94 crimes, while Disney had only 15.
The company has received multiple downgrades from various analysts, and the recent heavy selling in the stock could be exhausting itself. Despite the endless onslaught of bad news, the most important factor is price, and according to the Stock Traders Daily real-time trading report, the stock is near a test of long-term support. As a rule, we are buyers near support, and as long as the stock remains above support, we expect higher levels and a test of resistance. However, support also acts as our stop loss, and if support breaks lower, the otherwise positive bias that exists now would dissolve, and sell signals would surface.