Carnival (NYSE:CCL) is about to release earnings. Ponder this Bear Case Scenario:
Carnival is reputed to be the worlds largest cruise line. As the cruise business goes so goes Carnival. With over 100 vessels the capital cost is enormous. Hotels are constantly refurbishing and upgrading. Hotels have learnt to franchise properties to manage capital. When will Carnival ponder this lesson.
With so many destinations Carnival runs the risk of sudden geo-political adversities. yes ships may be repositioned. But in the meantime cancellations and wasted marketing programs will be expensive.
Carnival has taken advantage of offshore costs for labour and commodities. This low-cost scenario will dissipate over time. Carnival will have a hard time maintain low costs.
High profile cruising accidents such as Costa Concordia, Costa Allegra, and Carnival Triumph continues impacting the brand image and quite possibly pricing power.
George Gutowski writes from a caveat emptor perspective.