It took the world's largest cruise line a long time to get back on track, but investors don't see it that way. Shares of Carnival (CCL 3.40%) have surrendered nearly half of their value in 2022, down 65% since hitting a post-pandemic peak in the springtime of last year. Carnival isn't alone.

Smaller rivals are also taking in their fair share of water. Royal Caribbean (RCL 6.67%) and Norwegian Cruise Line Holdings (NCLH 1.49%) are down 49% and 56%, respectively, from last year's high-water marks. Can the cruise ship operators bounce back? We'll get a good glimpse on the state of the industry when Carnival reports fresh financials later this month.

A couple holding hands while relaxing on a cruise ship deck.

Image source: Getty Images.

Falling back to berth

Compare the cruise line industry to where it was early last year -- when the stocks were two to three times higher -- and it's not even close, fundamentally speaking. Carnival had just a handful of ships sailing in April of last year, when its stock was at its high, and capacity was constrained by physical distancing and other safety requirements, travel restrictions, and weak passenger demand. Carnival was burning through $500 million a month. 

Carnival is in much better shape right now. Cash from operations has turned positive. Its fleet is available. COVID-19 precautions were relaxed earlier this month, inspiring more landlubbers to come back to the high seas. We should see signs of top-line success in the upcoming report. Analysts are modeling $4.93 billion in revenue for the fiscal third quarter that ended in August, a nearly sevenfold increase from where it was a year earlier. We're still well short of the $6.5 billion it delivered up during the seasonally potent summertime quarter three years ago, but Carnival is clearly clawing its way back.

Analysts see a loss of $0.13 a share on the bottom line, and some of them are even hoping for a profit. This is naturally a major improvement from where it was a year ago, but the deficits have clocked in larger than Wall Street pros have been expecting in each of the four previous quarters. 

It's not exactly smooth sailing for Carnival, Royal Caribbean, and Norwegian Cruise Line. There are new concerns. The wobbly global economy is now a problem in terms of demand and affordability. Rising rates will increase borrowing costs for these highly leveraged companies. The strong dollar will scare away international visitors from North American cruises. We're also not exactly out of the woods with the old COVID-19 concerns. 

The upside is there for all three cruise line stocks, but the same can be said about a lot of growth stocks trading 49% to 65% -- if not more -- below last year's highs. The biggest metric coming out of Carnival's report won't be its revenue or even if it finally turned a profit. Future bookings will be the thing to watch. Are folks still booking future sailings? Is Carnival avoiding a spike in cancellations from recession-fearing passengers? Are new bookings willing to pay more than before? The right answers can send Carnival and the rest of its peers in the right direction again.