3 Reasons to Buy Carnival Stock Before 2025

As we enter the final quarter of an amazing year full of records and comebacks, Carnival (CCL 4.82%) (CUK 4.39%) the stock is roughly constant to date. But that won’t last. There are a lot of good things happening at the cruise line operator right now, and the problems could start to be ironed out quickly. Here are three reasons to buy Carnival stock before the year is out.

1. Business is at record levels

Carnival continues to report record quarter after record quarter. In its fiscal third quarter (ended Aug. 31), the company reported third-quarter records for:

• Revenue of $7.9 billion, up 14% from last year
• Operating income of $2.2 billion, up 34% from last year
• Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $2.8 billion, up 25% from last year
• Total customer deposits of $6.8 billion
• Net and daily returns, cruise specific values

2025 is already booked at high levels with low inventory remaining at record ticket prices (again). 2026 is also starting to register at record levels and the company is maneuvering its large fleet to meet demand. It has renamed some ships to capture high demand for certain lines and is bringing new ships on board to handle growing interest over time.

Carnival has three new ships scheduled for delivery by 2028, with a goal of one or two per year. It is low for the next few years so the company can manage costs efficiently while benefiting from growing demand.

It also recently ordered three new ships — which will be the company’s largest ever — for delivery in 2029, 2031 and 2033, but that’s a long way off now. Carnival is positioning itself to maintain its place as the largest global cruise operator and continue to post new records.

2. Lower interest rates could give it another boost

In the short term, Carnival is stuck with a huge debt load while working hard to generate enough cash to pay it back and still operate from a growth point. It managed efficiently, paid off its highest interest loans and increased its credit facility to maintain a financially sound position. It ended the third quarter with total long-term debt of $28.6 billion and $4.5 billion in cash and equivalents.

Lower interest rates will help Carnival in two important ways. The first is that it should be able to refinance some of its loans at better rates, resulting in lower interest payments and more cash available to invest in the company. It can also repay its capital more quickly.

The second way lower interest rates can have a positive impact on Carnival is by stimulating the economy and general spending. Although the Carnival boasted incredible performances, many people refrained from buying high-cost items. As inflation moderates and interest rates fall, more and more people will return to spending on larger, more expensive items.

With lower debt and strong results, Carnival stock should start to look more attractive to investors.

3. It’s still cheap

Because Carnival stock hasn’t moved while revenue and profits have grown, the valuation has remained low. It trades at a price-to-sales ratio of less than 1 and a forward price-to-earnings (P/E) ratio of under 11. That’s a very cheap valuation.

If the market is giving him this low price, he doesn’t feel the potential right now. So how do you know if it’s a bargain or a value trap?

On the one hand, the high debt puts Carnival at risk because it needs to generate a lot of cash to pay it off, and there’s a possibility that demand will die out before it can finish. On the other hand, Carnival continues to prove it is relevant by investing in its products and keeping demand high.

The effects of lower interest rates could show up in the financials soon enough, pumping new growth into the business. It’s not for the extremely risk-averse investor, but Carnival stock should start rising again, and 2025 could look a lot better than 2024.