Part of the Carnival (CCL 1.49%) (CUK 1.34%) brand, P&O Cruises just reported its strongest booking day ever. It's officially wave season, a period following the winter holiday season when travelers can purchase cruise packages at a discount.
Interestingly enough, four out of P&O's five best-ever booking days occurred during Wave 2023. And considering that wave season runs through March, these record-breaking booking days could continue.
Let's take a closer look at Carnival, and why I think the cruise line stock remains a buy amid snowballing revenge travel demand (people making up for lost travel time during the pandemic).
Revenue per passenger eclipses pre-pandemic levels
In Q4 2022, Carnival earned more revenue from onboard passengers than in pre-pandemic 2019. And what's more intriguing is that it did so while carrying 19% fewer passengers than the same period in 2019.
Revenue per passenger edged out Q4 2019 levels by a mere but significant 0.5%, indicating the start of a possible momentum shift for the Miami-based operator. With a rallying spirit, CEO Josh Weinstein boasted of Carnival "gaining momentum" on its return to profitability.
After record Black Friday and Cyber Monday sales, Carnival's advanced bookings for 2023 raced ahead of its historical average. And as booking volumes strengthen, cancellations have fortunately tapered off. Carnival now projects occupancy to meet -- and even exceed -- 2019 levels by this summer.
Opposing currents
But it's not all calm seas ahead for Carnival. Despite the recent thrust, COVID-19 continues to burden operations. With China still inundated by restrictions and lockdowns, Carnival removed its fleet from the region, focusing its mobile assets in waters where demand remains strong. And conflicting COVID-19 protocols across different countries have complicated the reopening of travel.
Aside from COVID-related obstructions, the ongoing Russia-Ukraine conflict continues to plague Carnival's business in Europe, where a significant portion of cruises are typically booked each year. European cruise itineraries, particularly in the Baltic region, have been upended by the war. As Weinstein conveyed during the Q4 earnings call, "the war and associated impacts have weighed heavily on consumer confidence in those regions, resulting in greater uncertainty and closer-in booking patterns."
A longer booking time is preferred by cruise companies, which not only affords more preparation time for voyages, but also helps project future financial performance. Undeterred, Weinstein affirmed "a measurable lengthening in the booking curve" across Carnival's portfolio of brands.
Image source: Carnival.
Why I think Carnival is a buy
From its January 2020 high of roughly $52 per share, Carnival stock plunged more than 80% to its current price in the $10 range. New investors might wonder if it's time to buy the dip or wait for calmer seas.
Considering occupancy levels could surpass 2019's baseline as soon as this summer, and passenger revenue already outpaces 2019 levels, my personal opinion is to buy the dip while it lasts. If investors wait until Carnival reaches full speed before diving in, they could potentially be paying more in the wake of buying activity.
In this case, I side with the prophetic Warren Buffett, who advised to be "greedy when others are fearful." The current-year growth estimate for Carnival lands at nearly 100%, according to Yahoo! Finance, suggesting lively travel demand could carry on in the near term.
