Amusement Park Giant, Carnival, Outperforms Market for Two Consecutive Years. Will Its Streak Continue in 2025?
Carnival's stock (CCL -1.02%, CUK -0.90%) has shed its meme status and excelled in the market for two consecutive years. With a 130% surge in 2023 and a 34% gain in 2024, the cruise giant has left its competitors in the dust.
Embracing the rebound of the cruise industry, Carnival is seizing its role as the industry leader, dedicating efforts to win back passengers and rejuvenate its business. Yet, some lingering effects from its pandemic debt amassing persist.
Is Carnival's good fortune about to wane with the start of 2025 after its two-year streak, or should investors seize the opportunity to jump aboard for even more profits?
Where Passengers are Embarking Today
Step onto 2025 with Carnival, enjoying its best-ever booked position, following a year full of record-breaking revenue and earnings. The company boasted a record $25 billion in revenue for fiscal 2024, along with a record $6.1 billion in adjusted EBITDA. The operating income swelled 80% equating to a record $3.6 billion. Furthermore, advanced bookings for 2025 sat at all-time highs for both occupancy and price.
Boosting confidence, Carnival surpassed its guidance on every metric, fueled by high demand. The company is currently two-thirds booked through 2025, already setting records for 2026. The lucrative period promises historical highs for price and occupancy, with 2026 bookings outshining their 2025 counterparts.
In 2025, moderating inflation and lower interest rates will lead to increased consumer spending, particularly on luxury experiences like cruise tickets.
Investing in customer attractions, Carnival launched three new ships in the previous year and has several more in the works. It's pouring money into digital advertising and boosting pre-cruise onboard sales. Exclusive destinations, like Celebration Key, are on the horizon. Set to debut in the second half of this year, Celebration Key aims to offer the "ultimate beach day" experience.
The Final Destination
While life on board Carnival's ships is looking pretty great, the company's net income isn't quite there yet. On the bright side, the company reported its first net profit since the pandemic in 2024, a substantial leap from the $74 million loss in 2023. Net income for 2024 totaled $1.9 billion.
The company generates positive operating and free cash flow and manages to strike a balance between investing in new opportunities and paying off its debt. Still, that debt remains a substantial obstacle to overcome. Carnival's debt stands at about $27 billion, nearly $17 billion more than pre-pandemic levels. However, Carnival has made strides in bringing down its debt, with about $8 billion less than the peak. Its debt-to-adjusted EBITDA ratio has declined from 6.7 to 3.8.
Carnival stock faced a slump for most of the year, but it received a reprieve after the Federal Reserve began implementing lower interest rates. This move can be expected to trigger heightened interest in Carnival's cruises and make it simpler for the company to pay off its debt over time. The concern is that demand may falter before Carnival fully eliminates its debt.
Regardless, Carnival's performance and stock gains are too impressive to ignore. With countless cruises already booked at higher prices than 2024, a promising 2026, and decreasing debt, the stock is on the rise. The stock trades at a modest 10.5 times forward one-year earnings and 1.2 times trailing-12-month sales.
As debt decreases and Carnival continues to demonstrate strong performance, its stock will keep climbing. The summary: Carnival is enjoying the trip, with roughly two-thirds of 2025 booked at higher prices, and 2026 looking even better. The rocky road of debt remains, but Carnival is clearly determined to navigate it succesfully.
- Given the strong performance of Carnival in 2025, with record-breaking revenue and earnings, some investors might consider it a reliable opportunity for further investing in finance.
- Despite the carnival-like success of Carnival's business in 2025, with high bookings and occupancy rates, the company continues to grapple with the amortization of its pandemic debt.
- Looking ahead to 2026, as inflation moderates and interest rates lower, investors might find especially attractive the opportunity to invest in luxury experiences like Carnival cruises.
- To capitalize on the demand for their cruises, Carnival is investing heavily in customer attractions, such as new ships and exclusive destinations, demonstrating their commitment to staying reliable and competitive in the finance industry.
