The coronavirus pandemic has impacted Carnival (LSE: CCL) UK shares more than practically any other FTSE 100 company. The cruise operator had to stop nearly all of its sailings at the beginning of the pandemic.
It’s currently unclear if or when the business will be able to restart operations.
The company has been able to raise billions from investors to keep the lights on. These actions have helped Carnival shares stabilise in recent weeks. And according to the group’s management, customers are booking in droves for 2021.
As such, could now be a good time to buy the stock before its operations restart next year?
Are Carnival UK shares worth buying?
The world’s largest cruise operator has its primary stock market listing in New York. Carnival UK shares track this listing. The company also reports to its primary investor base in the US, which can make it difficult for UK investors to follow the business.
Despite this drawback, Carnival UK shares have previously been popular with UK income investors. Before the coronavirus crisis struck, the stock supported a dividend yield of around 5%, which was above the FTSE 100 average yield at the time.
Unfortunately, the company had to eliminate this distribution to save money. And it doesn’t look as if it is going to make a return any time soon. The group is currently burning through hundreds of millions of dollars every month with no revenue. Until it can restart operations, this will continue.
The date at which the group is planning to restart is continually changing. Initially, the company proposed the beginning of August as a restart date. It’s now October at the earliest. Some ships have even had their restart dates pushed out into the first quarter of 2021.
Uncertainty prevails
These numbers suggest that it could be nearly a year before the whole fleet is back in action. A second wave of coronavirus could delay the timetable even more. Until this uncertainty is removed, it will likely continue to weigh on Carnival’s UK shares.
There is also a chance that the company could run out of money before sailings resume. This is the worst-case scenario. Even though management has managed to raise enough money to keep the business solvent this year, an extended shutdown would pile the pressure on Carnival’s balance sheet.
As such, it may be a good idea to avoid the shares for the time being. While the stock looks cheaper after its recent declines, a lot of uncertainty surrounds the business at present.
It may be better to wait for the company to get a portion of its fleet up and running again before buying the shares as part of a diversified portfolio.
This would remove the worst-case scenario and allow investors to profit from any upside as the group’s recovery takes shape.
Using this approach may mean investors miss some upside by not buying Carnival UK shares at today’s low level, but it should also help shareholders avoid the worst if the company runs out of money before cruises restart.
