Time to Board Carnival Cruise Lines' Stock Price Rally

Key Points

• Carnival Cruise Lines is sitting pretty, with record booking levels pointing to sustained growth, cash flow, and a rapidly improving balance sheet. 
• Analysts' trends are bullish and likely to support the market in the second half of the fiscal year. 
• The company is on track to achieve its cost-savings and earnings goals a year earlier than expected.

Carnival Cruise Lines' NYSE: CCL share price is up about 50% for 2024 and rallying in the second half because the business is strong. Details from fiscal 2025 include sustained growth following industry normalization, record results, and improving guidance. Results include healthy cash flow, balance sheet improvements, and an outlook for investment-grade debt quality to be reclaimed. The net result is that financial health is improving and expected to continue improving to the point that dividends may soon be resumed, and with them, share repurchases are both significant catalysts for improving shareholder value. 

Carnival Guests Party Like It's 1999

Carnival Cruise Lines had a solid quarter in Q4, with revenue rising 10% to a record level. The strength was driven by volume, ticket pricing, and on-board spending, all at record levels. The top-line strength is compounded by operational efficiencies and improved yield metrics, with costs rising less than revenue. The company’s gross margin improved by roughly 2000 basis points to reverse operating losses posted in the prior year. The adjusted EBITDA came in at $1.2 billion, a record level and up nearly 30% year-over-year. 

The guidance is strong and likely to lead analysts into result and stock sentiment revisions. The company says customer booking in Q4 is at record levels and rising, driven by tickets and on-board extras. Advanced booking is also at record levels, extending into 2026, with EBITDA per lower booth expected to run at a two-decade high. Adjusted net income is expected to run at +20% in 2025, and this may be a cautious estimate given the travel trends. 

As strong as the business trends are, the balance sheet improvements are more impressive. The company paid down $3.3 billion in debt, bringing the total since debt peaked to nearly $8 billion. The balance sheet highlights at the end of the year include a reduced cash position, offset by its robust cash flow, and a reduction in debt and liability, which resulted in a significant increase in equity. Shareholder equity surged by 50% and will likely continue to grow as debt is paid down and the balance sheet is restored to its former strength. Regarding leverage, long-term debt is less than 3x equity, a healthy ratio for any stock. 

The Analysts' Tailwind Unlikely to Cease in 2025

The analysts' trends have been positive for Carnival for over a year, with increasing coverage, improving sentiment, and an upward trend in the consensus price target. These trends are unlikely to end now that the F2025 outlook has been issued and are more likely to strengthen. Until then, the consensus of 18 analysts tracked by MarketBeat is a Moderate Buy with a price target of $26.60. The $26.60 price target assumes the stock is fairly valued at the mid-December high, but the revision trend suggests a move above $30 is likely, and a multi-year high will be set in 2025. 

Institutional activity is equally bullish. The institutions have bought this stock on balance every quarter of 2024, with dollar-based buying volume outpacing selling by 2:1. The institutions own more than 65% of the stock and provide a strong updraft for the price action. 

Carnival Cruise Lines Could Hit $40 in 2025

The technical indications for Carnival Cruise Line are bullish. After a short consolidation, the stock moved higher in H2 2024 and showed support at the 30-day EMA. Confirmed support at the 30-day EMA suggests the uptrend will continue and possibly extend the rally by $5 to $13. An advance of $5 aligns with the analyst revision trend, while the $13 bull-case target aligns this market with the pre-COVID price points, where its financial health suggests it should be trading.