Carnival Corp (NYSE:CCL) shares are trading higher Tuesday morning, lifted by a resurgence in bets that the Federal Reserve will slash interest rates in December. Additionally, shares of travel companies are also trading higher ahead of the Thanksgiving holiday. Estimates indicate that the travel period may be the busiest in 15 years.
According to CNN, the FAA is anticipating more than 52,000 flights Tuesday alone. Here’s what investors need to know.
- CCL shares are powering higher on strong volume. Review the technical setup here.
What To Know: Following dovish remarks from Fed officials Christopher Waller and Mary Daly regarding a softening labor market, CME FedWatch data shows the probability of a cut has surged to over 81%, despite sticky producer inflation.
This macroeconomic pivot is particularly bullish for Carnival. A December rate cut would be a significant boon for the cruise line for two specific reasons.
First and foremost, Carnival is highly sensitive to the cost of capital due to the massive debt load it accumulated to survive the pandemic. A lower interest rate environment reduces the expense of variable-rate debt and lowers the cost of future refinancing, directly improving Carnival's bottom line and free cash flow recovery.
Secondly, the cooling consumer data suggests the Fed is moving to prevent a recession. As a consumer discretionary company, Carnival relies on disposable income. By cutting rates to support the labor market, the Fed helps ensure the soft landing necessary to keep vacationers booking cruises.
For CCL, lower debt servicing costs combined with a stabilized consumer economy can create the conditions for a rally.
Benzinga Edge Rankings: Benzinga Edge data underscores the stock’s fundamental appeal with a strong Value score of 71.99, suggesting significant upside potential as interest rate pressures ease.
CCL Price Action: Carnival shares were up 5.23% at $26.06 at the time of publication on Tuesday, according to Benzinga Pro data.
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How To Buy CCL Stock
By now you're likely curious about how to participate in the market for Carnival – be it to purchase shares, or even attempt to bet against the company.
Buying shares is typically done through a brokerage account. You can find a list of possible trading platforms here. Many will allow you to buy “fractional shares,” which allows you to own portions of stock without buying an entire share.
In the case of Carnival, which is trading at $25.95 as of publishing time, $100 would buy you 3.85 shares of stock.
If you're looking to bet against a company, the process is more complex. You'll need access to an options trading platform, or a broker who will allow you to “go short” a share of stock by lending you the shares to sell. The process of shorting a stock can be found at this resource. Otherwise, if your broker allows you to trade options, you can either buy a put option, or sell a call option at a strike price above where shares are currently trading – either way it allows you to profit off of the share price decline.
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