What happened

Carnival (CCL -0.42%) (CUK -0.55%) shares bounced back strongly on Wednesday, only to give up all their gains -- and more -- this afternoon. As of 1 p.m. ET today, shares of the cruise tourism icon were taking on water and were down 9.4%, sinking below where they traded before the company announce an earnings beat yesterday. They closed Thursday down about 7%.

Indeed, they're sinking to lows last seen in October.

Worse, Carnival's U-turn appears to have caught its rival cruise stocks in its wake. Royal Caribbean Cruises (RCL 1.23%) shares were down about 4.5%, and Norwegian Cruise Line Holdings (NCLH 0.66%) stock was off almost 5% on the day.

So what

Yesterday, fourth-quarter 2022 earnings were something of a win for Carnival, with revenue falling a bit short of expectations, but losses also slimmer than expected.

All that was true yesterday, and it remained true today -- including the fact that Carnival lost $1.27 per share for the quarter and $5.16 per share for the year, and predicted that it will keep losing money in the fiscal first quarter of 2023. And that bad news didn't really justify Wednesday's stock price rally.

Digging deeper, there's the matter that has bedeviled cruise stocks for the past three years: Carnival's cash burn, and how much money it has left in the bank to fund it while it waits for conditions to improve.  

According to an abbreviated cash-flow statement attached to its earnings release, Carnival generated negative $117 million in operating cash flow in the fourth quarter (and negative $1.7 billion for the full year). Both numbers were improved year over year, but Carnival also spent heavily on capital investment -- $1.2 billion in the quarter and $4.9 billion for the year. That is a bad thing, at least for free cash flow and for Carnival's cash reserves.

The company burned more than $1.3 billion in the fourth quarter alone, and $6.6 billion for all of 2022.

Now what

Carnival has amassed significant cash to absorb these losses. Management puts its "liquidity" at $8.6 billion, including roughly $6 billion in cash and "restricted" cash. Unfortunately, this liquidity is far outweighed by Carnival's long-term debt (now approaching $32 billion), its short-term borrowings, and the portion of its long-term debt that is coming due shortly -- an additional $2.6 billion.

Carnival doesn't expect to have as much in capital expenditures in future years, as it did in 2022. But the company does anticipate more than $10 billion in capex over the next three years, which will be a continued drag on free cash flow. Absent significant improvement in operating cash flow in the near term, it looks likely Carnival will need to sell more stock, take on more debt -- or both -- before the next year is out.

What's true for Carnival might not be the case for Royal Caribbean or Norwegian Cruise Line, but it also might be true as well. Investors won't know for sure if their straits are as dire as Carnival's, however, until these two cruise companies report their own quarterly results in February.

That's a long time to wait, and for today at least, it appears investors are losing patience with cruise stocks.