Carnival Cruise (CCL US), the cruise ship vacation operator, fell as much as 5% in early trading today on the back of a Morgan Stanley rating cut to underweight, reflecting rising risks and lower peer group multiples. Although demand for taking a cruise may be subsiding, hedge fund demand for borrowing shares to sell short has been riding the wave higher.
According to the S3 Velocity Indicator, a measure of the real-time relative change in shorting activity, both the 7 and 30 day velocity trend lines have spiked considerably since mid-August. Most notably, borrow volume has surged almost 50% over the past 2 weeks of trading. Current short interest is now estimated to be at a multi-year high of up to $1.2billion, looking back to 2015.
With the company due to announce Q3 earnings on 9/20, short sellers have been positioning themselves for choppy waters on the horizon.
For more information on the above analysis, please contact:
Matthew Unterman, Director, S3 Partners, LLC
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