Few companies have been as damaged by the COVID-19 pandemic as Carnival Corp. (NYSE:CCL) (NYSE:CUK) (not to mention the cruise line business overall). Cruises have been shut down, customers are hesitant to return to sea, and given the slow vaccine rollout, it could be another year until we see the end of the public health crisis. 

Given that backdrop, will Carnival's stock rebound? 2021 will be a key year for the company's long-term recovery. 

Cruise ship anchored near a beach.

Image source: Getty Images.

How Carnival survived

Before discussing a potential recovery, it's worth going over how Carnival has gotten this far. The company is burning billions of dollars keeping ships afloat and that has required lots of cash from both debt and dilutive equity. You can see below that Carnival has taken on debt like crazy, and it hasn't stopped recently. Since Aug. 31, 2020, the company has borrowed a net of $4.4 billion and sold $2.5 billion of stock to help stay afloat.

CCL Shares Outstanding Chart

CCL Shares Outstanding data by YCharts.

Carnival does have $9.5 billion of cash on hand, which includes $2.2 billion in customer deposits, but that's needed just for operations. Monthly cash burn was $500 million in Q4 and management expects it to be $600 million in the first quarter of 2021. 

Survival has taken a lot of cash, and that has meant highly dilutive stock offerings that have more than doubled the number of shares outstanding over the past year, as well as debt sales. And it's the debt that has me worried long-term. 

Does the future look bright? 

When customers do return to the seas, Carnival may not have the earning capacity it once did. It is disposing of 19 ships, or 13% of pre-pandemic capacity, to cut costs. It is expecting to take delivery of just three ships in fiscal 2021 and another nine cruise ships by the end of fiscal 2022. With less capacity, Carnival won't likely be a growth stock over the next few years. 

Management is hoping that a fleet that will have larger vessels will be more efficient financially. That could offset some of the lost margin from having more ships, but only if customers come back.

Ultimately, the question is whether customers are going to return to cruise ships anytime soon. There's evidence that some will, as you can see by the $2.2 billion in deposits still on the balance sheet. But it could take time to fill ships at rates we saw pre-pandemic. That's ultimately the factor that will determine whether Carnival can turn the business around and start paying down some of its debt. 

Not a recovery to bet on

The chart below shows exactly why I don't think Carnival's stock is worth betting on. Despite billions of dollars in losses and an extremely uncertain future, the enterprise value of Carnival is only down 15% since the start of 2020. 

CCL Chart

CCL data by YCharts.

I simply don't see earnings or cash flow returning to what they were pre-pandemic given a tepid consumer environment and Carnival's smaller fleet over at least the next three years. For investors, there doesn't seem to be much upside in the stock and any recovery may already been priced in.