Carnival’s stock price has stalled in the past few months. It has remained between a low of $10.97 and its resistance point at $19.5, while American benchmark indices like the Nasdaq 100 and S&P 500 index have soared to record highs.
Carnival has underperformed its closest competitors, Royal Caribbean and Norwegian Cruise Line, which have risen by 38% and 1.75%, respectively.
Strong performance
Carnival’s stock performance has happened even though the company has done well financially in the past few quarters. For example, its stock has dropped by over 74% from its highest point in 2017, even as its revenues rose to a record high of over $24 billion.
Carnival’s annual revenue has been strong in the past few years, moving from $1.9 billion in 2021 to over $24 billion in the trailing twelve months (TTM).
It has also become a highly profitable company. Carnival’s net loss was over $10.23 billion in 2020 to over $9.5 billion and $6.09 billion in the next financial year. It has turned the tide, narrowing its net loss to $74 million in the last financial year.
The most recent financial results showed that the company’s net income rose to over $1.56 billion as it moved to a new normal.
Carnival and other cruise line companies have substantially higher margins than other companies in the hospitality industry. For example, CCL has a gross margin of 51.96% compared to Royal Caribbean’s and Norwegian’s 47% and 37%.
Improved guidance
Carnival published its quarterly results, which were much better than expected. Its revenue rose to $7.89 billion in the three months to August 31st, a big increase from the $6.8 billion it made in the same period last year.
Most of this revenue came from passenger tickets, while the others was in the onboard solutions it offers. Its nine-month revenue rose by over $3 billion to $19 billion, meaning that the company’s demand is still elevated.
Carnival’s net profit jumped from over $1.074 billion to $1.75 billion as the company charged higher ticket prices and slashed operating expenses.
A look at its headline figures shows that the company is doing well. For one, its forward bookings are booming since nearly half of its bookings have already been made, and its inventory remains low. Therefore, the company has hiked prices, with demand outperforming supply.
CCL has also started to see strong 2026 bookings. One reason for this performance is that it is seeing more diverse clientele. Unlike in the past, when older people mostly cruised, many young people took to the seas.
CCL’s forward bookings are an important part of its business. In the last quarter, the company had over $6.8 billion in forward bookings, which it can invest to generate free income.
Therefore, with Carnival, we have a company whose revenue and profits have soared to before the pandemic levels. Yet, the stock is about 73% below its highest level before the pandemic.
Read more: Carnival stock has surged, but is CCL still a good buy?
CCL is relatively undervalued
Carnival has better metrics than Royal Caribbean. For example, it has a forward revenue growth metric of 29%, higher than RCL and NCLH’s 26% and 27%, respectively. This means that analysts expect Carnival’s revenue growth to be better than that of its competitors.
However, the company has lower valuation metrics than Royal Caribbean. It has a forward price-to-earnings ratio of 9.21, lower than RCL’s 11.47. Its three-year P/E ratio of 9.21 is also lower than RCL’s 13.35.
Other valuation metrics are also smaller than those of Royal Caribbean. For example, it has a price-to-book ratio of 2.66, lower than RCL’s 7.69. Also, its forward EV to EBITDA ratio of 8.56 is smaller than RCL’s 11.82.
This divergence is mostly because Royal Caribbean is equally doing better, especially with the recently launched Icon of the Seas, which has attracted substantial bookings.
Analysts are optimistic that the Carnival share price has more upside. The average estimate for the stock is $23, which is about 30% above the current level.
These analysts cite the company’s strong demand and progress on its debt reduction measures.
Carnival stock price analysis
Turning to the weekly chart, we see that the CCL share price has been in a slow recovery in the past few months. It has rallied from a low of $5.9 in 2022 to over $18 today.
The stock has formed an ascending triangle pattern whose upper side was at $19.5, where it failed to move above in July and December 2023, and July and September this year. This is one of the most popular bullish signs in the market.
Therefore, there is a likelihood that the stock will continue doing well in the coming months, especially if bulls push it above the resistance point at $19.51.
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