It's been eight months since I pitted Carnival Corporation (CCL +0.47%) (CUK +0.29%) against The Walt Disney Company (DIS 0.68%). I sided with Disney at the time, and you would think that there's no way I would lose. Disney shares were in a funk with its theme parks closed and its box office business crushed, but the jaw-dropping success of Disney+ would fuel a monster rally that lifted the stock to all-time highs by the end of the year.
Carnival's fate has not been as fortunate. The world's largest cruise line operator is still not sailing, and it's not expected to start again until April at the earliest. It's bleeding through $530 million a month in its current state. Despite this perfect tsunami, Carnival's stock has been a strong performer since my initial sparring of the two titans of leisure.
Carnival stock has soared 64% since facing off on May 14 through Tuesday's close. Disney has managed to hold up slightly better, up 66% in the same time. Investors would have fared well with either investment, but let's draw a new starting line in the beach sand. Let's see which stock is the better buy between Disney and Carnival now.
Image source: Disney.
Survive vs. thrive
Carnival is the undisputed top dog in the high seas. It has a fleet of more than 100 ships across 10 different cruise lines. Disney has just four ships to its name -- and that will grow to seven in the next five years -- but that's not a bad thing.
The appeal to Disney right now over Carnival is that it's widely diversified. Both are coming off a rare unprofitable quarter. Both suspended their dividend distributions last year. Disney's hitting new highs because it's about so much more than just the cruising industry with its current state of nothingness and its future of question marks.
Disney will return to top-line growth this fiscal year, and there's a good chance it will surpass fiscal 2019's peak performance. Analysts don't see Carnival getting back to where it was in 2019 until 2025 at the earliest.
The world has changed. Cruising in general and Carnival in particular may not be able to live up to heightened standards. At the very least it will have to spend a fortune to market its product, as every month that goes by without its fleet entertaining passengers makes it that much harder to return to form at some point in the future.
Disney has done a much better job of rolling with the punches. In 2019 it had all six of the country's highest grossing movies at the local multiplex. Now it has pivoted to not only digital distribution but to milk its money-making franchises even more through series and movies that it will market through its ascending Disney+ streaming platform. Even the temporary closure of its theme parks hasn't rattled the House of Mouse. Disney World has emerged with widespread mobile ordering, smoother security screenings, and a better understanding of guest behavior.
Disney has learned a lot over the past year. Carnival hasn't learned a thing, and it's had to bloat its share count and debt load in the process. Carnival now has enough liquidity to stay afloat for another 12 months without sailing. Disney will be profitable, growing, and more relevant. One company is trying to survive, and the other is plotting a course to thrive. The better buy wasn't clear in May, but it is right now. Disney is a better buy than Carnival.
