Down 59%, Is Carnival Stock a Once-in-a-Generation Investment Opportunity?

Key Points

• Carnival is experiencing robust demand that’s driving continued revenue growth.

• Soaring profits are helping the business improve its debt profile, reducing financial risk for investors.

• Even after the stock’s strong performance, the valuation is below the market average.

• 10 stocks we like better than Carnival Corp. ›

Carnival (NYSE: CCL) (NYSE: CUK) was decimated when the COVID-19 pandemic hit in 2020, as operations were halted to help stop the spread of the virus. Revenue tanked, and the business had to take on more debt to survive with the fate of the economy being a big unknown. However, Carnival is firing on all cylinders these days.

This travel stock has soared 202% in the past three years (as of July 22). But shares still trade a gut-wrenching 59% off their peak. At the current price, is Carnival a once-in-a-generation investment opportunity?

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Image source: Getty Images.

Smooth sailing

As the economy opened back up and consumer behavior normalized following the early days of the health crisis, there was robust demand for travel. The cruise industry has benefited tremendously, with Carnival posting strong financial performance.

After sales hit a low of $1.9 billion in fiscal 2021, they came roaring back. Fiscal 2024's revenue of $25 billion was 13 times higher than that total three years prior. And in the most recent quarter (Q2 2025 ended May 31), Carnival registered an 8.6% top-line gain. In fact, the sales figure was a Q2 record.

"Our guests continue to look to us as their preferred vacation choice given the amazing experiences our cruise lines provide," CEO Josh Weinstein said in a press release.

However, the current economic climate, one where uncertainty is the key word, isn't making things easy. Throw in President Donald Trump's unpredictable trade policies and ongoing geopolitical turmoil, and it makes sense people are pulling back spending.

The cruise industry, however, is positioned to continue its success. One reason why is that it's doing a great job attracting younger travelers -- who could become lifelong customers -- as well as first-time cruise goers. And compared to land-based travel alternatives, cruises are generally viewed as providing more bang for your buck. Then there's the fact that spending on cruises makes up less than 3% of the entire global travel industry, leaving upside for further growth.

Carnival's improving financial situation

With revenue continuing to climb at a healthy clip, Carnival is also posting consistent and rising profitability. Operating income totaled $934 million in the second quarter, another record. It's wild to think that four years ago, during Q2 2021, the company registered an operating loss of $1.5 billion. Things have certainly turned around for the better, which explains why the stock has performed so well.

Wall Street expects the good times to keep rolling. The consensus analyst forecast is for Carnival's earnings per share to increase at a compound annual rate of 22.2% between fiscal 2024 and fiscal 2027. Despite huge gains in recent years, this outlook is very encouraging for investors who undoubtedly want to see continued expansion as we look ahead.

Improving profitability is helping Carnival fix its financial situation. This means it's been able to slowly reduce its massive debt burden, which now stands at $27.3 billion. The company has refinanced $7 billion worth of debt so far this year. Two major credit ratings agencies have also upgraded Carnival's debt, which is a clear indication of reduced financial risk.

Not a once-in-a-generation play

Carnival's business continues to perform well, and the future looks bright. The current valuation is also reasonable, with the market asking investors to pay a price-to-earnings ratio of 16 to buy the stock. This represents a substantial discount to the S&P 500 index.

However, the stock isn't a once-in-a-generation investment opportunity right now. While Carnival's shares have a good shot at outperforming the market over the next five years, I don't believe it's going to produce life-changing results over the next few decades. That being said, investors could still consider buying Carnival stock.

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Neil Patel has no position in any of the stocks mentioned. The Motley Fool recommends Carnival Corp. The Motley Fool has a disclosure policy.