Short (CCL@$19.03)
Wine plus a carnival, as many Brazilians and West Indians will testify through the remaining memory cells, equals Bacchanal Time. Revelry. Debauchery. Festivity. Happy clients of Carnival Corp (CCL), often to be found in the Caribbean asking for directions back to the harbour, will concur (typical CCL client get together pictured at above left).
Indeed, the long term trends for CCL speak to an extended bacchanal: aging populations with money, low penetration of this key market and a quasi oligopolistic position for the company itself.
However, a larger party just fizzled out in world financial markets leaving many potential cruisers with asset portfolios severely cut in value and feeling decidedly poor. A cursory examination of the relationship between the S&P 500 and tourist arrivals in key Caribbean destinations (for example) shows a shockingly close correlation. The lag is a quarter and the bad news has begun to appear in booking data at CCL and even more so at its rival Royal Caribbean.
Much of this is in CCL's price. But the outlook for bookings for the next 6 months is as non-bacchanalian as one would could imagine. With price competition rudely trespassing on a previously comfortable duopoly - plus the latent threat of higher fuel prices (CCL operate unhedged) - the sector is a crush candidate.
NB: painting = Bacchanalia (Auguste Léveque)
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