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Is the Carnival share price the biggest bargain on the FTSE 100 today?

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The Carnival share price has been hit harder than almost any other by Covid-19. As the world’s biggest cruise ship operator, it was always going to struggle. In total, 1,500 passengers were infected with the virus across its fleet, including 700 on the Diamond Princess, of whom 13 died.

The Carnival (LSE: CCL) share price is down in the dumps. It started 2019 trading at around 3,650p. Today, you can buy it for 970p, a drop of three quarters. Some may have expected it to fall even further. So has the panic been overdone?

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Last week, management at the FTSE 100 company, which also owns Cunard, P&O, and Costa cruise brands, announced pay cuts and job losses aimed at saving “hundreds of millions of dollars” over the next year or so. Cost savings are essential, given that the company has generated “no meaningful revenue” since the crisis struck.

FTSE 100 stock in troubled waters

Some have suggested the pandemic could shrink the cruise industry for good. Many of the industry’s critics would rather like that. Will it happen or can the Carnival share price recover?

Longstanding cruise customers are showing signs of resilience. Carnival reports that 38% have asked for refunds following cancellations, with the majority choosing to sail at a later date. We will know more from August, when Carnival plans to get eight of its ships out there again, although only in North America.

Demand might be stronger than you think. Operators are already reporting strong bookings for 2021. Many are attracted by big discounts. Others feel safe booking having been told they can reschedule, or cancel, without fear of penalties. The Carnival share price could benefit.

The demand seems to be coming from regular cruise travellers who know and trust their operators. They’re calculating that cruise operators will be working harder than ever to uphold hygiene and social distancing. However, the company still faces tough questions on how the coronavirus spread on three of its ships.

The Carnival share price is temptingly low

Carnival is the only stock listed both in the US and UK, but isn’t banking on a bailout from either government. It’s issued enough debt and equity to continue operating in the current environment until November. As Coronavirus pandemic shows signs of receding, it could just make it.

You would still have to be supremely brave to buy the Carnival share price, even at today’s low valuation. I think the big threat is we get a second wave of the pandemic when autumn comes. That could shake sentiment.

On the other hand, the cruise industry should be ready for it this time. If it avoids a major outbreak, the Carnival share price could prove surprisingly buoyant.

However, it’s still too big a risk for me right now. I believe there are far more exciting stocks to buy today.

Like this one.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Carnival. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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