Carnival share price analysis: extremely pressured ahead of earnings

Carnival share price has slumped and moved into a bear market after falling by ~26% from the year-to-date high. It ended last week at 1,830p, near its lowest level since December last year. Its upcoming results this week will provide hints on the impact of the ongoing Iran war on its business.

Carnival is facing major headwinds as the Iran war continues

Carnival and other cruise line companies are between a rock and a hard place as the Iran war continues. Viking Holdings stock dropped to $68 from the year-to-date high of $81, while Royal Caribbean fell to $263 from $355 in February. Norwegian Cruise Line has slumped to $19 from $25.

These retreats happened as investors anticipate a double-whammy in the industry amid the ongoing war. The most significant is that Carnival’s operation costs have jumped because of the rising oil prices. This is important as oil is one of its biggest costs in its operations.

Other costs will likely keep rising in the coming weeks as the impact of energy trickles down, especially in the food market. The war has pushed fertilizer prices higher, which will boost food prices in the coming months.

On the other hand, the company may see cool demand as the war continues. While Carnival has no exposure to the Middle East, people may pare back their cruise spending in the near term. Most of its customers are from the US, followed by Germany, the rest of Europe, and the UK. 

On top of this, many customers may be concerned about norovirus, which sickened about 150 people on a Caribbean cruise.

Carnival to publish its earnings this week

Carnival Corporation will be in the spotlight this week as it publishes its financial results. These results will show that the company’s business continued doing well in the first fiscal quarter as demand for cruising remained elevated.

The most recent numbers showed that Carnival had a net income of $2.8 billion last year, with its revenue rising to $26.6 billion. Its operating income jumped to a record high of $4.5 billion.

This growth continued in the fourth quarter, with the net income soaring to $422 million. The company also ended the quarter with over $7.2 billion in customer deposits.

Analysts expect the upcoming numbers to show that its revenue rose by 5.67% to $6.14 billion in the first quarter, while its earnings per share (EPS) soared to 18 cents.

In a recent note, analysts at Morgan Stanley said that the company was still a bargain. The analyst predicted that, while its costs and revenue growth may slip this year, the situation will improve once the war ends. He pointed to its dip during the COVID-19 pandemic and Russia’s invasion of Ukraine.

Carnival share price technical analysis

CCL stock chart | Source: TradingView

The daily chart shows that the CCL stock price has slumped in the past few weeks. This retreat happened after it formed a double-top pattern at 2,415p and a neckline at 2,037p. A double-top is one of the most common bearish patterns in technical analysis.

The stock has dropped below the 50-day and 100-day weighted moving averages. It has also formed a bearish flag pattern and moved below the 38.2% Fibonacci Retracement level. 

Therefore, the stock will likely continue falling in the near term, and then rebound once crude oil prices stabilize. It may hit the 50% retracement level at 1,765p and then resume the uptrend.