CCL - Carnival Corporation

It's a good dividend paying stock for a long term hold. On my radar as well but haven't pulled the trigger yet

 

Yeah I feel comfortable of holding it for awhile, should bounce back once the coronavirus scare is going way

 

From the perspective of a Buffett disciple, CCL could have the ultimate corporate moat.

This stock wasn't on my radar, until I started following this thread. Thank you, StockJock-e.

 

I suspect our sensibilities align pretty well but I respectfully wish to push back on your position, just a little.

First, I agree with everything you wrote. Seriously. Yeah, I'm not good at arguing.

Cruise ships are energy hogs but....

The average American uses 4650 KWh/year. I use Americans because we dominate the national makeup of cruise passengers.

I selected a cruise ship with published energy statistics. Without a doubt, this cruise ship is modern and efficient. The larger the ship, the more efficient it is likely to be.

Still....

This ship carries 8880 people and consumes 11 MWh idling at port. Annualization of that consumption brings us to 11000 KWh/year. From this, I surmise people consume roughly 2.5 times more power on a cruise than at home.

This does not take into account propulsion. This will vary by route but ships don't sail that much of the time and ships are very efficient transport. Let's assume the consumption is about 3.5 times based on wild speculation.

The total cruise passenger count for a year is about 30 million.

30 million people, consuming 3.5 times their normal amount of energy, for a period of 10 days, is not all that significant in a global population of 7.5 billion.

Good work is being done to transform the cruise industry from the power hog it has been into something more reasonable. My numbers come from a modern ship, but I anticipate a further reduction of 50% or more in the next decade.

Air travel is, by far, a greater environmental impact than cruising. Unfortunately, the two are joined at the hip.

Meanwhile, those of us with wives understand the most staunch environmentalist could care less about the environment for 10 days while she shops for shoes and purses aboard a glamorous ship.

Perhaps we share the same view but not the same estimation of the impact scale.

 

I agree, the energy requirements of cruise ships can be improved, I think more easily than it can be done in airplanes because the cruise ship isn't trying to stay in the air at 500 mph.

Tom's post does ignore the pollution factor of cruise ships. But even that may not be an issue. Because the ports that cruise ships use are already polluted. It's not like they're killing coral reefs before our eyes. More pollution isn't going to make things worse where cruise ships are docking; they're already as bad as can be.

 

What you have cited is criminal behaviour but it has nothing to do with how environmentally viable the cruise industry is. Some people need to be fined while others need to go to jail.

I've toured the top of glaciers and the guides would have kicked our butts, had we have carelessly thrown aside a used tissue.

I've watched street people defecate in public but that is not the last word on the viability of bathrooms.

The industry needs to be brought to responsibility for their environmentally hostile actions and it needs to be done on the short term. It's not only environmentally bad, it's straight up asshole behavior. Medium and long term, the cruise industry needs to work on reducing their energy footprint and improve other environmental factors.

As far as the energy footprint goes, they could easily compensate for their 11 MW cruise ship by building a 50 MW solar farm near any major city that is powered by fossil fuels. Giant cruise ships cost upwards of a billion dollars up to $1.5B. A 50 MW solar farm to offset the emissions will cost $25~30M and it will pay for itself with a power purchase agreement.

I believe the long term viability of cruising looks pretty good.

 

Anyway, I have no interest in swaying anyone's opinion to mine. The more people who think I'm a clueless nut-job, the more people I can potentially take money from in the market. That is, if they don't take my money. lol!

 

I could not agree more.

 

Does anyone know Carnival's cash burn rate?

They had over a half billion in cash at the end of the last quarter. No doubt, they have less now.

I would imagine they can easily raise cash, even at times like this, but it would be interesting to see what kind of shape 12 hard months will leave them in.

 

Pun intended?

When cruisers and sailors bring their vessels out of the water for maintenance or storage, they refer to their boats being "on the hard."

 

I've been considering the idea of an eco cruise line, as per the discussion with T0rm3nted.

The idea of a cruise line setting up a solar farm to offset their carbon footprint is viable and logical but it's also short term. Once fossil fuel power production is largely abandoned, the idea will be obsolete.

In 50 years, will cruise lines be able to run entirely on solar? Sort answer, no. Long answer, no.

The next step in solar technology will get us into the low 40% efficiency range. It's on the horizon and it is expected to be a game changer. This could offset a cruise ship's carbon footprint but will not provide a path from fossil fuel.

If we had 100% efficient solar, it still wouldn't be enough to run a current cruise ship's power consumption but it would come close.

I am assuming solar collection would be limited to the deck surface area, if it had a 100% solar canopy.

In order to be carbon free, a cruise ship with either have to switch to solar and batteries plus run an extremely austere power profile that would be a radical departure from current consumption profiles or it would have to source a lot more power, such as from a small nuclear generator. Do we want nukes onboard private vessels? It certainly raises a discussion.

A big ship would use 15 megawatts of power under way. That would require 15 Tesla MegaPacks and it would only be able to travel for two hours. With 60 MegaPacks, it could travel for eight hours. That would give it a reasonable range but this idea doesn't seem all that practical.

Then there is the idea of how to transfer hundreds of megawatt hours from shoe in a few hours. Could the local grid handle a 25 MW load? In San Diego, no problem. In a small Caribbean island, zero chance.

... and how do we make that connection? That size of a recloser is going to be a major installation and they aren't designed to make/break contact multiple times per day. It can be done but it would require quite a bit of engineering. Not a big deal in the grand scheme, I suppose.

 

This is entirely speculative. This post is not based on any specific knowledge. I engage in this thought exercise because I believe the market profile on CCL is sufficiently clear that it will be possible to profit from our shared knowledge.

I think cruising will come back in style, once COVID-19 is mostly gone. Perhaps it will never be the same, perhaps we are beyond peak-cruise, but I'm confident it will come back to a major extent. COVID-19 should be mostly gone in 24~30 months.

How then, will cruise lines survive? Perhaps they won't.

Carnival has $0.5B in cash. I don't know how far the company can shrink but surely they can moor their ships and pay for their crews to go on a wildly over-priced boat excursion to shore where they will be unemployed for two years. Debt service on $11.5B will soak up that 0.5B in pretty short order, so they will need some major bailing out.

The stock itself peaked at about $70. It currently sits at $18.75. I speculate they have a long way to go, on the down side, based on projected business fundamentals. It appears to be an ideal short position.

 

Perhaps a scenario which would allow cruise lines to keep running would be to pre-test guests. If testing could be done sufficiently quickly, people could check into a hotel the night before departure, get tested, and leave the next day with a clear result.

But, what of shore excursions? This is one of the key aspects of cruising. Surely local Bananastan residents will be a huge risk.

The number 1 attraction of cruising seems to be eating. Perhaps they could have food-only cruising. Guests can watch the bodies of pneumonia victims burn on rafts in colorful ceremonies as they sit in high dining comfort, eat irradiated food, and float past disease ravaged islands.

Yeah, it's tough to see anything other than an existential struggle for survival for cruise lines.

 

When I bought $30 puts, three weeks ago, they were cheaper than $20 puts are going for, right now.

I'm already well into the money and yet it is clear the reward is not worth the risk. I always feel this way with options. It seems like a 1 in 3 chance of multiplying my money 5x, best case, or 3x, likely case.

In fact, options seem to be a way for brokerages to monetize hubris.

In this case, it would seem likely I will make more than the hubris tax but I always feel like options are something I shouldn't do, even when I do them. lol!