After being decimated by the COVID-19 pandemic, Carnival (CCL 2.15%) has been sailing smoothly. Demand has bounced back tremendously. This has helped drive shares 137% higher in the past three years (as of June 26).
The business just reported another fantastic quarter. Revenue increased 9.5% year over year to $6.3 billion. Diluted earnings per share (EPS) skyrocketed 500% to $0.42. Both of these headline figures came in ahead of Wall Street expectations.
It's easy to remain bullish on Carnival. Should you buy this cruise stock while it's below $30 per share?
Image source: Carnival.
Cruise demand remains robust
Carnival ended the latest fiscal quarter on May 31 with $8.5 billion in customer deposits, an all-time record. Occupancy and pricing are strong as well.
The demand Carnival is seeing from customers is interesting because this isn't the case across the travel industry. Demand for hotels and airlines could be under pressure throughout the rest of 2025. Both Uber and Airbnb registered slower revenue growth in the first three months of 2025 than in the final quarter of 2024. This could signal tougher times ahead, as macroeconomic and geopolitical uncertainty lingers.
There's clearly something about cruises that keeps drawing customers in. Affordability could be one factor. Compared to land-based travel alternatives, cruises are cheaper and give travelers more value. Zooming out, the industry is bringing in younger and first-time cruise travelers. That's an extremely encouraging sign, as it highlights an expanding opportunity set of potential customers.
The leadership team raised full-year guidance across the board. Of note, they expect better net yields and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) than just three months ago.
"We continue to set ourselves up well for 2026 and beyond, with so much more potential to take our margins, returns and results even higher over time," CEO Josh Weinstein said in the earnings press release.
Carnival is positioning itself to keep capturing demand. Its Celebration Key private island destination will open in July, and an updated rewards program will be introduced in 2026.
Management is focused on improving the financial situation
It's generally a smart move for investors to avoid owning businesses that have high levels of debt. As of May 31, Carnival carried $27.3 billion of long-term debt on the balance sheet. While that might be cause for concern at first glance, the company's financial situation continues to improve dramatically. This creates a positive setup for investors.
Carnival's debt load is down from a peak of nearly $35.1 billion less than three years ago. In the latest fiscal quarter, its credit rating was upgraded by both S&P Global and Fitch.
Carnival can pay down its debt because profits are surging. Net income jumped 514% in Q2, supported by operating expenses that were up just 2%. Carnival has now beaten Wall Street adjusted EPS estimates in 11 straight quarters. And the leadership team once again raised guidance, expecting 40% year-over-year adjusted net income growth.
Carnival stock's reasonable valuation
Carnival shares have crushed the market in recent years. They are up a whopping 46% in the last 11 weeks, but the valuation still doesn't look expensive. Shares trade at a price-to-earnings ratio of 13.9. That's a very compelling proposition.
While it can be easy to focus only on the positive trends with Carnival, investors should be mindful of risks. One obvious factor that should always be on investors' minds is the broader economy. Should there be a severe recession, I wouldn't be surprised if consumers look to tighten up their purse strings.
Even understanding this risk, Carnival is a smart buy, with its shares trading under $30.
