Carnival share price is unraveling. Is it the next Cineworld?

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Carnival (LON: CCL) share price crashed to an all-time low as concerns about the company continued. The stock plummeted to a low of 531p, which was about 91% below its all-time high of 5,428p. It also managed to drop below the important support level at 608p, which was the lowest level on April 1st. 

Memories of Cineworld

The recent price action of the Carnival share price has brought memories of Cineworld, a company that is slowly imploding. The two firms have a market-leading share in their respective industries. Carnival is the biggest cruise-line company while Cineworld has a strong market share in the US and UK.

Cineworld and Carnival were also hurt significantly by the global pandemic. Deemed as non-essential, the two companies were forced to close their operations for more than a year. Unlike airlines, they did not receive any significant bailout funds.

As a result, they turned to the debt market to fund their business. In all, Cineworld’s total debt surged to more than 5.2 billion pounds. Carnival, on the other hand, has more than $35 billion in debt, which pales in comparison to its $8 billion worth of shareholder equity.

Therefore, with interest rates rising, there are concerns about whether the company will be able to pay its debt. Besides, the cruise line industry is not recovering at a faster pace than what most analysts were expecting. This is similar to the fact that Cineworld’s box office industry is still under intense pressure.

Meanwhile, the cost of doing business for Carnival has risen while demand remains low. The firm is paying more money for fuel and workers. With inflation rising, most analysts believe that the company’s demand will take time to recover. Therefore, while it is too early to tell, the possibility of Carnival moving to administration cannot be ruled out. As we wrote in this report, Carnival

Carnival share price forecast

Looking at the long-term monthly chart, we see that the Carnival stock price has been in a freefall since September 2017. In September, the stock managed to move below the important support level of 620p, which was the lowest level in May 2020. The stock has crashed below all moving averages while the RSI has been in a downward trend.

Therefore, the CCL share price will likely continue falling as sellers target the next key psychological level at 500p.

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