Carnival Cruise Has Sunk 67%, Here’s Three Reasons I’m Jumping Onboard

Let’s talk about Carnival Cruise, the company that not only gave my wife and me an unbelievably cheap honeymoon but has also been tossed around by the market like a rubber duck in a hurricane. Shares are down over 67% from their pre-pandemic highs, and yet here I am, telling you this might just be the bargain of a lifetime. I know, it sounds a little nuts, right? But stick with me—because I’m about to give you concrete reasons as to why this stock might just be the sleeper of the next couple of years.

First things first: Carnival's business isn’t just barely staying above water—it's been cruising (I apologize) right past Wall Street’s expectations for the past few quarters. Case in point? The latest Q2 earnings report where Carnival posted record revenue of $5.8 billion, a solid 18% increase year over year. Now, if you’ve been paying attention, you might be wondering why a company that’s raking in the dough is still trading at a third of its pre-pandemic price. Is it because Carnival shares the same customer base as the used Nissan Altima market? That might have something to do with it, but the answer isn’t that simple.

Let’s get the obvious out of the way: debt. Carnival’s got a lot of it—like, “you need therapy” levels of debt. We’re talking over $27 billion in long-term obligations. That’s a number so big it could probably sink the Titanic (again). And yes, those interest expenses are certainly taking a big bite out of their earnings. But here’s the thing—Carnival is handling it. They’ve been chipping away at that mountain of debt and making their operations more efficient, which means they’re in a much better position than the market is giving them credit for.

Now, here’s where it gets even better. Despite all the debt and the post-pandemic blues, demand for cruises is off the charts. Carnival’s bookings are through the roof, with future sailings already filling up faster than me and my wife could down pina coladas on our Caribbean cruise. As of now, they’ve got $8.3 billion in customer deposits, a record high, and over 50% of their demand for the next 12 months is already booked. That’s like having a year’s worth of income lined up before you even start working. And here’s the kicker: 55% of their guests are repeat customers. If that doesn’t scream “we’re doing something right,” I don’t know what does.

So why isn’t the stock price reflecting this? Well, the market’s still hung up on the fear of a looming recession and those annoying high interest rates (that just might be coming down here very soon). But here’s the thing—those fears are probably overblown. Forget my used Nissan Altima joke a little bit earlier, because despite all the memes and reels you’ll see on instagram about every Carnival Cruise feeling like a Travis Scott concert, Carnival’s passengers are mostly seasoned travelers who’ve got both age and cash on their side. The kind of folks who aren’t going to let a little inflation get in the way of their Caribbean getaway. Plus, the second interest rates start to dip, you can bet your bottom dollar that Carnival’s bottom line is going to get a serious shot in the arm. Lower interest rates lead to cheaper debt payments, meaning more money can be funneled into the company’s pockets.

So, should you take a chance on Carnival stock? Absolutely. Sure, the stock’s been tossed around like a suitcase at baggage claim, but that just means it’s going for a steal. Carnival’s been pulling all the right moves—cutting costs, packing the ships with record bookings, and raking in more revenue every quarter. The market is undervaluing this stock, and once it catches up to reality, you could be looking at a hefty return. If you can handle a bit of risk and wait for the ship to right itself, Carnival could just be one of the biggest winners in your Stonk portfolio a year or two from now. As Alexander Hamilton famously said, “Just you wait.”

Stock.News does not have positions in companies mentioned.