Carnival cruise lines (NYSE:CCL) sought a return to normal. Try your best, however, the waters remain choppy for the beleaguered cruise line. CCL stock, after a big rally earlier this year, is back in a strong downtrend.

The novel coronavirus continues to wreak havoc on the travel industry as a whole. Cruise lines in particular have struggled with their significant debt load and inability to return to normal operating conditions. While some travel agencies, such as budget airlines, have seen a decent recovery, the cruise industry is still down from pre-pandemic levels.

So how should investors approach CCL stocks? The company clearly survived the pandemic, so the bears that predicted Carnival’s impending demise were clearly incorrect. However, it will take a long time for Carnival’s fundamentals to improve a lot. And, meanwhile, stocks aren’t as cheap as they first appear.

Still no clear path to a full reopening

It made sense to buy Carnival and other cruise stocks last year with the hope that the company would prosper in the future. By mid-2020, it seemed likely that the travel industry would become quite healthy once vaccines were rolled out. Unfortunately, that didn’t really happen. The long-awaited “Roaring Twenties” never really materialized.

Variants of the virus continue to appear. This has led to the second, third and even fourth waves of the pandemic in some parts of the world. Meanwhile, vaccines have been shown to be less effective at stopping transmission of the virus than many had anticipated, so demand for pleasure travel has stabilized.

As a result, the sector’s previously expected return to normal levels of cruise activity has been delayed. Carnival, as of September 19, was operating exactly half of its US fleet. It’s much better that no income comes in.

But in the cruise industry, which has low profit margins and is capital intensive, it’s less than ideal for a business to have half of its assets producing no income.

Some traders might think it is worth waiting for CCL’s stock to recover. While half of its business is still offline, that income has to come back sooner or later, they would say.

Meanwhile, CCL stock is apparently trading well below its 2019 levels. There’s a catch with this theory, however: To survive, Carnival has issued a ton of new stocks and new debt. As a result, the enterprise value (EV) of the company – its market capitalization plus its debt – is actually higher than in 2019. So, in today’s stock price, the market says that Carnival is worth more now than it was before the pandemic began.

Disney rains on the parade

Every time we receive a slew of positive headlines about the pandemic, this is apparently offset by negative news. Recently, for example, it appeared that the peak of Covid cases in Southeast America was finally starting to ease. This is crucial for the cruise industry, as many of its customers reside in this part of the country and several of its key ports are located in Florida.

However, improving sentiment towards the CCL stock fizzled out on Tuesday. When is it Walt disney (NYSE:SAY), during a call with analysts, revealed that the Delta variant was impacting its business. For example, the conglomerate reported that Delta was delaying production of its new films. The DIS stock collapsed on the news.

Keep in mind that Disney operates its own cruise line, and last month Disney said the company is largely resuming business as usual. Thus, the fall in Disney shares on new Covid issues has disappointed travel agencies, including Carnival.

The verdict on CCL Stock

If you bought CCL shares last year before the economic reopening, congratulations. Carnival shares, despite the company’s huge operating losses and the sale of many new shares, managed to quadruple their lows at one point. It was a fantastic business.

However, there is little reason to hold CCL stock now. The outlook for the company is not brighter now than it was in 2019. In fact, it is arguably much less promising. Meanwhile, Covid-19 is causing major problems for much longer than most analysts anticipated. And the company’s balance sheet is far from pristine, to put it mildly.

Add it all up and there are much better places to invest right now than CCL stocks. With cruise traffic likely to be cut through 2022, there is no quick turnaround ahead for the industry. As a result, stocks will remain in rough seas for the next few quarters.

As of the publication date, Ian Bezek does not have (directly or indirectly) any position in any of the stocks mentioned in this article. The opinions expressed in this article are those of the author, subject to the publication guidelines of

Ian Bezek has written over 1,000 articles for and Seeking Alpha. He also worked as a junior analyst for Kerrisdale Capital, a $ 300 million New York-based hedge fund. You can reach him on Twitter at @irbezek.

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