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Carnival stock is on edge amid strong operation metrics

Writer's picture: Chris Chris

Carnival Cruise Ship
Carnival Cruise Ship

Carnival Holdings (CCL) is one of the biggest players in the cruise line industry. It operates its eponymous brands that cater to different types of clientele. In addition to its eponymous brand, it also owns companies like Princess Cruises, Holland America, Seabourn, Cunard, and AIDA Cruises. 


Carnival is its biggest brand with 27 ships followed by Princess with its 16 ships. Cunard, its smallest brand, caters for the luxury market. 


Carnival competes with three other big companies in the industry: Royal Caribbean, MSC, and Norwegian Cruise Lines. Over the years, these firms have managed to coexist. Broadly, it also competes with hotels and other holiday companies.


Carnival’s business has bounced back from the Covid-19 pandemic when governments ordered them to close because of the pandemic. 


Before Covid, Carnival generated over $20 billion in annual revenue, a figure that dropped to $5.5 billion and $1.9 billion in the following two financial years. Last year, however, its revenue bounced back to over $21 billion as revenge travel continued. 


Carnival’s stock has dropped by 2.80% this year, underperforming Royal Caribbean whose stock rose by over 38.5%. Its stock was trading at $18 on Monday, while its HypeIndex score rose by 118%.


Carnival stock HypeIndex
Carnival stock HypeIndex

Positive hype


  • Carnival Corporation has attracted substantial positive hype because of the ongoing recovery. Its revenue in the trailing twelve months (TTM) rose to over $24 billion. 


  • Its results have demonstrated that Carnival is seeing more demand from its key customers in the US and other geographies. 


  • Its third-quarter net income jumped by 60% to $1.7 billion, while its revenue jumped to a record high of $7.9 billion. 


  • The company also increased its full-year guidance because of the strong booking metrics. It is also having robust margins, with the gross margin yield rising to 19%.


  • Meanwhile, the demographics of cruising are changing, which will benefit Carnival and other companies in the industry. Unlike in the past when old people mostly did cruising, many young ones are now venturing into the sea.


  • Carnival benefits from pre-booking since most people book their trips many months in advance. This trend enables it to anticipate demand and also receive funds, which it invests and gets a return. In the last quarter, its total customer deposits rose to a record high of $6.8 billion. 


  • The company has also benefited from higher cruise prices because of the surging demand. Its cruise cost per available berth day rose by 3.4% in the fiscal third quarter. 


  • Debt has been a key issue for Carnival since it had to borrow heavily during the pandemic. It has used its strong performance to pay back debt, leading to credit rating upgrades by Moody’s and S&P Global.


  • Analysts are upbeat about Carnival, with its stock target rising to $23, higher than the current $18.


Negative hype


  • While impressive, Carnival’s recovery is slower than that of Royal Caribbean, which has become the biggest cruise company by market cap.


  • Carnival still has a high debt load of over $26 billion, making it one of the most indebted companies in Wall Street. This debt load means that its interest expense will remain high for a while.


  • The cruise industry is highly cyclical, meaning that a slowdown will likely happen in the coming months.


Summary on Carnival stock


Carnival stock chart
Carnival stock chart

Carnival Corporation is a blue-chip company that has a large market share in the cruise line industry. Together with the competing brands like Royal Caribbean and Norwegian, they are oligopolies that face little disruption from other companies.


Its business is doing well, with its margins and revenues surging to a record high. This trend will likely continue now that central banks have slashed interest rates, making travel more affordable.


Technically, the stock will need to rise above the crucial resistance point at $19.51 to validate the bullish trend. This is an important level, which was its highest point in December and July last year.


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HypeIndex is an AI platform that detects Hype in stocks and cryptos before it moves the market, providing reliable early detection for profitable investment opportunities.

The algorithm for our proprietary HypeIndex score is based on sentiment analysis, data science and machine learning.


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