Where Will Carnival Stock Be in 5 Years?
Key Takeaways
The cruise line leader's business operations are finally stabilizing.
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5 min read
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investment
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July 1, 2025
05:10 AM
The Motley Fool
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The cruise line leader's operations are finally stabilizing
Carnival (CCL 1. 96%), the world's top cruise line operator, suffered a severe slowdown during the pandemic's height as global travel and tourism ground to a halt
On April 2, 2020, its stock closed at just $7. 97 per -- its lowest closing price since the Black Monday Crash of 1987
At the time, investors were worried that Carnival would struggle to stay solvent
But over the ing five years, its stock more than tripled to its current trading price of around $27
Let's see why it bounced back -- and where it might be headed over the next five years
Image source: Getty Images
How did Carnival survive the COVID-19 crash
In fiscal 2019 (which in November 2019), Carnival was still expanding its fleet, gaining more passengers, and keeping its occupancy rate above 100%
But in fiscal 2020 and fiscal 2021, its number of passengers and occupancy percentages plummeted
Metric FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Passengers Carried Growth 4% (73%) (65%) 542% 62% 8% Occupancy Percentage 107% 101% 56% 75% 100% 105% Revenue Growth 10% (73%) (66%) 538% 77% 16% Data source: Carnival
The fiscal year ends in November
To survive that two-year downturn, Carnival susp its operations in many, sold its older ships, and deferred its new ship deries
It also laid off and furloughed hundreds of employees, issued and sold new s, took on more debt at double-digit interest rates, and ext its existing credit lines
As a result, Carnival's total debt nearly tripled, from $11. 5 billion at the end of fiscal 2019 to $33. 2 billion at the end of fiscal 2021
But after the pandemic passed, its passengers returned and its occupancy rates rose again
By fiscal 2023, its total revenue and passengers carried finally surpassed its pre-pandemic levels from fiscal 2019
That growth continued throughout fiscal 2024
In the first half of fiscal 2025, Carnival's total passengers rose 3% year over year, it maintained an occupancy percentage of 104%, and its revenue grew nearly 9%
It also reduced its total debt year over year to $27. 3 billion -- but that still accounts for 45% of its enterprise value
That ratio was only at 26% at the end of fiscal 2019
What are Carnival's catalysts
For fiscal 2025, Carnival expects its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) -- which excludes the interest payments on its debt, the depreciation of its ships, and other fluctuating expenses -- to rise 10%, versus analysts' expectations for 13% growth
It didn't vide any top-line guidance, but analysts expect its revenue to rise 6% in fiscal 2025
Carnival also returned to fitability on a generally accepted accounting principles (GAAP) basis in fiscal 2024, and analysts expect its GAAP net income to imve 36% in fiscal 2025
Those rising fits are being driven by its higher average fares (aided by last-minute and premium cabin bookings), more onboard spending per customer, lower fuel costs, better operational efficiencies (especially in its new liquid natural gas (LNG) high-capacity ships), and reduced interest payments on its declining debt
What will happen to Carnival over the next five years
From fiscal 2024 to fiscal 2027, analysts expect Carnival's revenue and adjusted EBITDA to grow at compound annual growth rates (CAGRs) of 4% and 8%, respectively
That stable growth should be supported by the modernization of its fleet and the digitization of its services, which could widen its moat against competitors Royal Caribbean (RCL 0. 57%), and its expansion in Asia
As Carnival's stabilizes again, it should gradually reduce its debt to more manageable levels
Once that happens, it might finally resume its buybacks and dividends -- which have both been paused since 2020 to preserve its liquidity
With an enterprise value of $61. 2 billion, Carnival trades at just 9 times this year's adjusted EBITDA
Royal Caribbean, which faces a lot of the same challenges but is shouldering less debt, trades at 15 times this year's adjusted EBITDA
Assuming Carnival matches analysts' estimates, continues to grow its adjusted EBITDA at a CAGR of 8% from fiscal 2027 to fiscal 2030, and trades at a more generous 10 times its forward adjusted EBITDA by the beginning of the final year, its stock price could rise 66% over the next five years
We should take that long-term estimate with a grain of salt -- since Carnival's recovery remains fragile -- but it could still have a lot more upside potential
If you expect the cruise line market to keep heating up through the end of the decade, Carnival could be a great stock to buy
However, you should keep a close eye on its debt levels and on any hints of a global recession, which could sink the cruise line market again
Leo Sun has no position in any of the stocks mentioned
The Motley Fool recommends Carnival Corp
The Motley Fool has a disclosure policy.
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