Cruise ship operator Carnival (CCL 0.92%) is coming off a strong year in 2024 where its share price rose by 34%. The company delivered impressive numbers as demand was through the roof, enabling the business to post record numbers and return to profitability, giving investors plenty of reasons to be bullish on the stock.
Can the company offer up a repeat performance in 2025, or could this prove to be a much more challenging year for the business?
NYSE: CCL
Key Data Points
Carnival is already off to a strong start to the year
A big advantage Carnival has over many other businesses is that cruises are often booked well in advance, giving the company a lot of visibility into future demand. When the company reported its most recent earnings numbers in December, management was already calling 2025 "another banner year," noting that close to two-thirds of the year's capacity has already been booked.
For many families, taking a cruise can be a unique and potentially more cost-effective travel option, and that looks to be resulting in some impressive numbers for cruise ship companies such as Carnival. Even as prices have been rising, Carnival's business is booming.
With a significant chunk of 2025 already booked up, Carnival is in an excellent position to fill up the year and to push more bookings out to 2026, which it says is already off to a strong start and breaking records. Plus, the company is opening Celebration Key this summer, its exclusive travel destination for guests in the Grand Bahama. It will offer unique experiences for its guests and could generate even more demand for its cruises.
The stock may be overdue for a much bigger rally
Carnival's business posted record revenue for the year ending Nov. 30, 2024, with sales topping $25 billion. Profits totaled $1.9 billion and were a big improvement from the $74 million loss which the business posted a year earlier.
As demand continues to soar, there can be room for Carnival to raise prices and not only boost sales even further but also increase its margins along the way. And with greater profitability, the business can make for a much more attractive investment.
Despite Carnival stock's strong performance in 2024, a lot of the rally came later in the year as for the most part, investors remained hesitant to buy shares of the business. As of Monday, the stock was trading at around $24, which is still nowhere near where it was before the pandemic when it was comfortably trading above $40.
Carnival stock may be one of the best buys for 2025
As the business is on track for another record-setting year in 2025, it wouldn't be unreasonable to expect even more of a rally from the travel stock this year as it is proving to be a safe buy. And it's still only trading at 14 times next year's estimated earnings (according to analysts).
The big risk for investors is that the company has a high debt load (nearly $26 billion in long-term debt), but stronger results have allowed Carnival to pay that down. And as the company continues to post robust earnings numbers, it will have the ability to reduce its debt even further. Furthermore, a decline in interest rates can make that debt less costly as well.
There are many reasons to be positive on Carnival's performance in the months and even years ahead. For investors, it may not be too late to invest in the company given its strong results, and there could still be a whole lot more room for the stock to go even higher.
