The economy is simplified as a tale of two worlds. Carvana (CVNA), a used car service, sold off sharply
after Ally Financial (ALLY) posted results. Ally’s results are a concern for auto sales.
Ally reported auto loan applications falling by 200,000 in Q2. Auto originations fell by $1 billion. In
addition, Ally took higher provisions due to loan growth in the auto finance market.
Investors should brace for higher auto defaults ahead. Weakness in automotive sales could worsen for
firms like Ford (F) and General Motors (GM). Toyota (TM) sells quality vehicles. The Japanese firm may
face sales constrained only by supply.
In the cruise ship market, Carnival (CCL) has a potential upside. It might have mounting debt it needed to
raise to survive. However, the company is posting strong revenue growth. In the third quarter, Carnival
posted revenue growing by 688% to $4.31 billion.
Carnival expects to potentially report a breakeven adjusted EBITDA in the fourth quarter. In 2023, it will
increase advertising spending. This will drive bookings and increase occupancy levels. Expect Carnival to
achieve occupancy levels matching historical levels next year.
Risks
Carnival relaxed Covid protocols in August. If health regulators impose tougher ones again, it could slow
booking volumes.
