3 Reasons to Buy the Dip on Carnival Stock

Key Points

• The giant cruise operator continues to see strong demand trends for its trips.

• Interest rates are coming down, which should create a tailwind for the company.

• Despite strong gains from their lows, the shares continue to look cheap.

• 10 stocks we like better than Carnival Corp. ›

Shares of Carnival (NYSE: CCL), the world's largest cruise line, were pulling back on Monday after a strong earnings report. Carnival delivered another quarter of record results during its third quarter, the seasonally strongest period of the year.

Revenue in the quarter rose 3.3% to $8.15 billion, which edged out estimates at $8.11 billion. Net yields, or prices, hit an all-time high over the last four quarters, which helped the company deliver strong margin expansion. Adjusted net income improved from $1.75 billion to $1.98 billion, or $1.43 per share, which was better than the consensus at $1.32.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Carnival also raised its guidance, reflecting improved net yields and effective cost management. It's now calling for adjusted net income to rise 55% for the year to $2.95 billion, or $2.14 a share. Additionally, it sees net yields up 5.3%, compared to a 3.3% increase in adjusted costs, and it expects a 15% increase in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to $7.05 billion.

Despite the strong results, Carnival stock fell on the news. It closed Monday's session down 4%, despite an initial spike on the news. The reason for the decline wasn't clear. Investors might have expected better results, or they think enough optimism is baked into the stock, as shares were running higher before the report came out.

Carnival stock is now down 10.4% from its peak just a month ago, and the pullback sets up an attractive buy-the-dip opportunity. Here are three reasons why.

Image source: Getty Images.

1. Booking trends remain strong

Despite concerns about an economic slowdown in the U.S., Carnival continues to see strong booking trends going forward, a sign that demand for its cruises continues to grow. It reported record customer deposits for the quarter at $7.1 billion, and management said that booking trends strengthened through the quarter and are higher than a year ago.

Nearly half of 2026 is booked at historical high prices for both the U.S. and Europe, and the company said it had record booking volumes for 2027.

Celebration Key, its new private island in the Caribbean, is off to a great start. Management said that the new island has received reviews, and returns on the investment are meeting expectations. Momentum for the business is clearly robust, and management expects Celebration Key to be a major demand driver.

2. Interest rates are coming down

Operationally, Carnival is doing phenomenally, but the stock is still weighed down by the massive debt load it took on to stay afloat during the pandemic shutdowns.

It continues to pay off that debt, and finished the fourth quarter with $26.5 billion, down more than $1 billion from the beginning of the fiscal year. It also refinanced $4.5 billion in debt during the quarter, helping to lower its interest expense, which fell from $431 million in the quarter a year ago to $317 million.

The Federal Reserve cut the benchmark Fed funds rate by 25 basis points earlier in September, and expects to make two more similar cuts over the rest of the year. That should allow Carnival more opportunities to lower its average interest rate, especially given the strength of the business. By cutting interest expense, it can grow net income even without an increase in operating profit.

3. The stock is still a good value

Carnival has been a winner since the pandemic, largely because of its execution and growth, but also because the stock offers a good value. Based on the adjusted earnings per share forecast of $2.17 for this year, it now trades at a forward price-to-earnings (P/E) of just 13.5.

Cruise stocks can be risky, due to their vulnerability to black swan events like the pandemic, or even economic downturns. But Carnival's recent results give investors good reason to expect smooth sailing ahead. Demand trends look great. It's steadily reducing its debt burden, and investments like Celebration Key should pay off over the long term.

The recent pullback looks like a great opportunity for Carnival stock.

Should you invest $1,000 in Carnival Corp. right now?

Before you buy stock in Carnival Corp., consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Carnival Corp. wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $631,456!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,147,755!*

Now, it’s worth noting Stock Advisor’s total average return is 1,064% — a market-crushing outperformance compared to 191% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of September 29, 2025

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