Carnival (CCL 4.38%) (CUK 4.20%) continues to deliver impressive results, but its stock is still 64% off its all-time high. There’s good reason for that; it has a huge debt that makes it risky.
But that isn’t likely to stick around forever. If you have some appetite for risk, now’s the time to buy before it pays off the debt and soars. Here are three reasons why Carnival stock looks ripe for buying today.
1. It’s experiencing record demand
Carnival is the largest cruise operator in the world, and it’s dealing with incredible demand for its industry-leading cruises. Over the past few years, as demand continues to soar and sales continue to increase, there have been various reasons investors have been worried that it would eventually slow down. It hasn’t.
Sales have surpassed pre-pandemic levels, and they continue to grow. In the fiscal 2025 second quarter (ended May 31), revenue increased 8.6% year over year.
Image source: Getty Images.
Demand is staying strong. It’s remaining at historically high levels, with 93% of 2025 booked in its second-highest-ever position, and 2026 also booked at historic levels. Total deposits were a record $8.5 billion in Q2. Carnival is also benefiting from increased onboard sales of non-ticket items like food and entertainment. Clearly, these are engaged passengers.
Revenue is trickling down to the bottom line, which took a little longer to get back into the positive. Operating income nearly doubled year over year in Q2 to almost $1 billion, and adjusted net income more than tripled from last year, well above management’s guidance. Earnings per share (EPS) of $0.35 beat internal guidance of $0.22 and crushed Wall Street’s expectations for $0.25. Management raised guidance for net income and EPS for the full year.
2. It’s investing for the future to keep it that way
All the worry about slowing down has been for naught up until now, but that doesn’t mean the worry is going away. Management is making many moves to keep demand strong and stay in growth mode for the foreseeable future.
It has one new ship scheduled for delivery this year, and it’s refitting some current ships with upgrades and new attractions. It has another four ships on order for delivery between 2027 and 2032.
The cruise line has been making a major marketing effort to generate buzz and interest in its new, exclusive asset called Celebration Key, a resort for Carnival guests in the Bahamas. It features beaches, shops, restaurants, and guest services, and it can accommodate two million guests annually, or two cruises at once, and it’s launching in July.
Carnival has two other experiences ready to roll out next year — RelaxAway and Isla Tropicale. These innovations can attract new users and feature new ways to vacation for repeat customers to keep high demand steady. It’s also launching a new membership program to achieve loyalty and drive more repeat business.
3. It’s almost at investment grade
As risky as it is for Carnival to hold so much debt right now, management has been paying it down efficiently. Although it stands at more than $27 billion as of the end of Q2, that’s nearly $10 billion off its peak total debt of $32 billion at the end of 2022. In Q2, it prepaid $350 million and refinanced another $1 billion at better rates.
Also in Q2, it got two upgrades from rating companies Fitch and S&P Global after getting an upgrade from Moody’s in Q1. It’s now one notch away from an investment-grade rating.
Due to the current risk, Carnival stock trades at the cheap, forward, one-year price-to-earnings (P/E) ratio of 12 and a price-to-sales (P/S) ratio of just over 1.
Carnival is demonstrating its resilience right now, becoming stronger through adversity. Not only is profitability coming back, but in Q1, it reported its highest operating margin in almost 20 years. These are the kinds of qualities you want to see in a great company.
Carnival won’t stay cheap forever, and now appears to be an excellent time to buy shares.
Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Moody’s and S&P Global. The Motley Fool recommends Carnival Corp. The Motley Fool has a disclosure policy.
