Sitting just 10% below its recent highs, Carnival (CCL 0.88%) (CUK 1.11%) has tripled in value since the COVID-19 pandemic hit U.S. shores.

Yet the cruise ship operator still sits 45% below where it traded before the world turned upside down in January 2020 and is off about 60% from its all-time high set back in 2018.

As Carnival's stock has been making steady gains on the outlook for being able to return to the high seas again, should you buy its stock now that it has been all but given the green light to resume cruises? 

Carnival Princess cruise ship

Image source: Carnival.

Battle for the high seas

The U.S. Centers for Disease Control and Prevention is being dragged grudgingly to allow cruise ship operators to begin taking voyages again this year.

The industry has been locked down for longer than any other business, and with no way to make money cruise operators have been forced to take on substantial amounts of debt to stay afloat. Their very survival may be threatened if the ban continues much longer; Florida Gov. Ron DeSantis has sued the CDC, arguing its rules unfairly target the cruise industry.

Although the state asked a judge to issue a preliminary injunction, the court punted the matter to mediation with a mandate to resolve the issue by June 1.

No cruise lines joined Florida in its suit, but the industry was again forced to cancel all the cruises it had anticipated launching in July, and now expects to begin sailing again beginning in August as it attempts to meet the CDC's restrictions. 

Comply or seek equal treatment?

Carnival and the other two major cruise operators, Norwegian Cruise Line Holdings (NCLH -0.52%) and Royal Caribbean (RCL 0.74%), are hoping to salvage the remainder of the summer sailing season, but even if they get the go-ahead from the CDC, what benefit they gain will be limited.

Summer cruises tend to be family affairs with parents and children both participating. CDC vaccination guidelines don't call for young children to be vaccinated, but its conditional sail order says as much as 95% of cruise passengers must be vaccinated. That means families that might have taken cruises won't be able to do so if their children haven't received the vaccine.

Norwegian has said it will require every passenger, regardless of age, to be vaccinated before it will allow them on its ships, and as the smallest of the three cruise operators with 28 ships, it may have more flexibility in imposing such a requirement. It is also asking the CDC to waive its requirements for its ships since no one will get aboard unless they can prove they were vaccinated.

Royal Caribbean keeps dropping the age restriction for those it will mandate to be vaccinated, now down to as young as 12. Carnival says the matter is still being considered, though it is leaning against requiring anyone to be vaccinated. After all, no other travel-related business, including airlines, requires its passengers to be vaccinated.

Dragging an anchor

Assuming Carnival does make it to open water again, and with the loosest possible restrictions, it will still need to contend with having to operate at less than full capacity. That will limit the amount of profitable revenue it will be able to generate from any one ship, ships that still have significant crew and maintenance costs to satisfy.

It also will need to divert a lot of the money to servicing the $20 billion in debt it now has on the books, and though the loans it took out give it breathing room to make it through the tempest until it can get back to full capacity -- assuming it can begin sailing again soon -- the load is going to be an anchor to performance until then.

While the cruise operators report seeing significant latent demand for cruises at or above pre-pandemic levels, the good news seems priced into their stocks. That makes it difficult to recommend buying Carnival at this elevated price point.