TLDR
- Carnival stock gained 6.94% on Friday, reaching a new 52-week high of $31.30
- The cruise operator is gradually reducing debt from pandemic-era highs while growing revenue
- Revenue is expected to grow 6% in fiscal 2025 driven by higher fares and new destinations
- Stock trades at discount valuations compared to competitor Royal Caribbean
- Technical analysis shows breakout underway with upside potential at current support levels
Carnival Corporation shares closed Friday at $31.30, marking a 6.94% gain and establishing a new 52-week high. The cruise operator has now posted two consecutive days of gains, outperforming both the broader market and key competitors.
The stock surpassed its previous 52-week peak of $31.01, which was set on July 23rd. Friday’s performance came during a strong trading session for equities overall, with the S&P 500 rising 1.52% and the Dow Jones gaining 1.89%.
Carnival outpaced competitor Walt Disney, which rose 2.28% to $118.86. Royal Caribbean Group gained 6.04% to $344.67, though it still lagged Carnival’s percentage gains for the day.
The company has traveled a long road since the pandemic nearly sank its business. In April 2020, Carnival shares plummeted below $8, representing a nearly 90% drop from their January 2018 record high.
Recovery Takes Hold
Carnival’s passenger numbers tell the story of its recovery. The company carried 73% fewer passengers in fiscal 2020 as the pandemic took hold. Fiscal 2021 saw another 65% decline as travel restrictions persisted worldwide.
Recovery began in earnest during fiscal 2022 with passenger growth rebounding 542%. The company has since normalized its operations, with occupancy rates climbing back above 100% by fiscal 2023.
Revenue growth has followed a similar pattern. After declining 73% and 66% in fiscal 2020 and 2021 respectively, sales jumped 538% in fiscal 2022. Growth rates have since moderated to more sustainable levels.
Analysts expect revenue to rise 6% to $26.5 billion in fiscal 2025. Higher average fares are driving much of this growth, along with increased onboard spending from passengers.
The company’s new Celebration Key destination in the Bahamas is also contributing to revenue gains. This private island experience gives Carnival another way to generate income from its cruise passengers.
Fleet expansion remains part of the growth strategy. Carnival operates 94 ships serving more than 800 ports worldwide. The company plans to add 10 more vessels to its fleet by fiscal 2028.
Margin Improvements Drive Profitability
Carnival has worked hard to improve its financial metrics since the pandemic. The company turned unprofitable in fiscal 2019 and remained in the red through fiscal 2023. Fiscal 2024 marked the return to profitability.
Higher fares have been a key driver of improved margins. Lower fuel costs have also helped, as have operational efficiencies from newer liquid natural gas ships in the fleet.
The company has been refinancing debt at lower interest rates, which reduces interest expenses. This debt management strategy is helping boost net profit margins across the business.
Analysts project earnings per share will grow at a 22% compound annual rate going forward. Adjusted EBITDA is expected to increase at an 8% annual pace over the same period.
At current valuations, Carnival trades at 13 times next year’s expected earnings. The stock also trades at 8 times next year’s projected adjusted EBITDA, making it appear attractively priced.
Royal Caribbean trades at 18 times forward earnings and 4 times forward EBITDA by comparison. This valuation gap reflects investor concerns about Carnival’s higher debt burden.
Debt reduction remains a priority for management. Total debt peaked at $33.2 billion at the end of fiscal 2021 after the company borrowed heavily to survive the pandemic downturn.
The debt load has since fallen to $27.3 billion as of the second quarter of fiscal 2025. This is still well above pre-pandemic levels of $11.5 billion, but the trend is moving in the right direction.
Carnival’s net debt-to-EBITDA ratio stands at 3.7 times, down from 4.1 times in the first quarter. Management continues to make prepayments and refinance debt at more favorable rates.
Technical analysis suggests the stock has momentum on its side. A breakout appears underway, with analysts identifying upside targets if converted support levels hold at current prices.
