Carnival Corporation Will Cruise to Higher Price Points This Year

Key Points

• Carnival Corporation will cruise to higher price points this year because of business trends, debt reduction, and earnings quality.
• Analysts' sentiment is firming for a 35% stock price increase in 2025 relative to the March lows.
• Institutional trends provide a strong tailwind for the market, with buying ramping to a two-year high in Q1.

Carnival Corporation NYSE: CCL stock will cruise to higher price points in 2025 because it is outperforming its guidance, exhibits robust business momentum, produces ample cash flow, and reduces its debt faster than expected. The combination has the company on track to reach its goals a full year ahead of forecasts, which is critical because of the debt ratings. The company lost its investment-grade ratings in 2020 because of the pandemic’s impact and is within reach of reclaiming them. 

Among the highlights from the record-setting first quarter of 2025 is accelerated debt reduction. The company not only paid down $5.5 billion in debt but also restructured some of its remaining load, extending the time to maturity and reducing the rates. This resulted in millions in annual interest expense savings, which will likely be used to reduce debt further as the year progresses. 

While debt reduction impacted the cash balance, the company remains well-capitalized, equity has held steady, and cash flow is improving sequentially and year-over-year. The takeaway is that earnings quality and financial health are improving and are expected to continue in 2025, improving the outlook for capital returns. The company focuses on debt reduction now but will shift to include capital return once its financial goals are met. 

Carnival’s Beat-and-Raise Quarter Overshadowed by Cautious Guidance

Carnival had a solid FQ1, with revenue growing 7.4% to $5.81 billion to beat MarketBeat’s reported consensus by $70 million. The strength was driven by demand for passage compounded by on-board spending, which aided better-than-expected operating performance. Internal efficiencies, demand, and spending trends improved gross yield by 25% and net by 7% to drive leverage bottom-line results. The operating income rose nearly 100% to $543 million, with a margin exceeding the peak 2019 result. The GAAP earnings are a loss due to the accelerated debt reduction, but adjusted EPS came in at $0.13 or more than a dime above forecast. 

The company's guidance is good but viewed as cautious by analysts. The company raised its revenue and earnings forecasts for the year, offering a solid outlook for Q2 supported by record-level Q1 deposits and 2025/2026 booking trends. Adjusted net income is expected to grow more than 30%, a double-digit increase from the December guide, but it fell short of consensus by a penny, leading many analysts to lower their estimates and stock price targets. 

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Analysts Sentiment Firms; Group Forecasts a 30% Upside for Carnival Stock

Some, but not all, analysts lowered their price targets following the Q1 release and guidance update. The other lifted theirs, leaving the consensus estimate flat and the range narrowing. The consensus forecasts a 35% upside, with coverage increasing and the Moderate Buy rating firming over the last two quarters. 

Institutional ownership trends align with the outlook that Carnival Corporation provides value near Q1 lows. The group owns nearly 70% of the stock and has bought on balance since Q2 2024 and ramped their activity through year’s end and into Q1 2025. The Q1 2025 activity includes an increase in selling but is offset by a three-year high in buying, which netted roughly $0.665 billion or 2.4% of the market cap when trading near $21. 

Carnival Hits Bottom; Ready to Rebound in 2025

Carnival’s stock price was impacted by fears of slowing or sluggish growth that are unfounded in light of the Q1 release. The company is not only growing its hospitality business but also improving its cash flow quality and reducing debt, which are compounding influences on each other.

The likely outcome is that debt reduction will continue to accelerate in F2025. Regarding the stock price, the market for CCL stock appears to have hit bottom in early March and is now moving higher within a range with the analysts’ consensus as the likely target. The critical resistance point is near the cluster of moving averages at $22.30; if the market can get above there, it should be smooth sailing until 2023’s highs are reached.