Cruise line stocks have been correcting lately, but nailing the bottom isn't easy. Shares of Carnival (NYSE:CCL) (NYSE:CUK) tumbled in March along with the rest of the market when the coronavirus became a grim stateside reality, and they also started to bounce back in subsequent weeks the way many popular stocks did.

Like an open-air midnight buffet in a rainstorm, the good times didn't last for the industry. As of Thursday's close, Carnival shares have now fallen 46% since hitting a short-term high in early June. Investors have also started to loosen up their positions on smaller rivals Royal Caribbean (NYSE:RCL) and Norwegian Cruise Line Holdings (NASDAQ:NCLH). It's awfully tempting to consider nibbling on the world's largest cruise line operator, especially since it's one of this year's biggest losers and a prime candidate to recover. Let's explore the positives and negatives of trying to buy Carnival following a huge slide. 

Concept art of the roller coaster that will be on the Carnival Mardi Gras when the ship finally enters its fleet next year.

An artist's rendering of a coaster that will be on the Carnival Mardi Gras. Image source: Carnival.

New lows on the high seas

The upside of a stock shedding nearly half of its value in a little more than three months is that it would have to nearly double to get back to where it was in early June. The problem is that the outlook was far rosier at that time. Ships were supposed to start sailing again during the peak summer travel season, and now we're looking at a tenuous restart in early November.

Hopes for a quick COVID-19 vaccine have faded. Globally, case counts are starting to inch higher again as we approach a million fatalities. It may take years before the virus is truly eradicated, and now investors need to discount a recurring event in the future. 

The turnaround will take time. Analysts don't see Carnival returning to profitability until 2022, and that assumes that things will be approaching business as usual then. Thankfully Carnival does have time. It had $8.2 billion in cash and equivalents on its balance sheet by the end of August with a current cash-burn rate of roughly $530 million a month.

There was a price to pay in beefing up its coffers. Carnival's interest expense and share count have moved higher in the process, gnawing away at per-share profitability. Wall Street pros may see revenue topping 2019's record level by 2023, but they also expect earnings per share to be less than half of what they were last year. This could also prove to be an optimistic scenario. Carnival's already committed to disposing of 18 of its less-efficient ships this year as it also pushes out future deliveries. 

With uncertainty in the air, there isn't going to be a lot of money pouring back into the industry until guests are comfortable with the dangers of sailing in the advent of another major virus or the experience itself in the new normal. The bullish argument for Carnival stems largely from the money that it has raised (more than anybody else) and its dominant market position across all of its brands. There will be a shakeout. Smaller rival Royal Caribbean has historically had the industry's thickest profit margins, so it's another likely survivor. Everybody else is going to struggle to just stay afloat. 

Carnival's already leading market share will grow, even if it simply means a thicker slice of a shrinking pie. Carnival will survive, but it may take several years before it can justify June's highs and much less the all-time highs of early 2018. There will definitely come a time to buy Carnival stock, but the climate will need to be far kinder than it is now. This is no longer a growth or a dividend stock, and the hazy future makes it too early to fully categorize it as a monster value stock. Carnival is a survivor, but the challenges are far from over here.