1 Reason to Be Very, Very Excited About Carnival Stock Right Now
Carnival stock is recovering from pandemic lows, boosted by potential interest rate cuts from the Federal Reserve. Despite trading below pre-pandemic highs, the company is experiencing record revenue and demand, with positive net income growth. However, it faces over $27 billion in net debt, which management is actively reducing. The stock is currently undervalued at 1.6 times trailing sales and has risen 93% in the past year, with expectations for further gains as financial conditions improve.
Carnival (CCL -3.15%) (CUK -3.23%) stock has been on a route to recovery from the early stages of the pandemic, and has received various boosts, including from the Federal Reserve cutting interest rates. It got another boost recently when the Fed signaled a cut is likely this month.
Carnival stock still trades way below its all-time highs set just before the pandemic's start, and its valuation is lower than historical norms. As interest rates fall, there's cause for excitement about Carnival stock.
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Carnival is cruising toward recovery
Carnival is back to its previous industry-leading business, setting new records for revenue, deposits, and operating income. It's also enjoying record-high demand, with high ticket prices, and it's maintaining its strong booking position. The only thing left on the income statement that hasn't returned to highs is net income, but it's now positive and growing.
However, Carnival still has a huge debt to service and pay off. As of the end of the 2025 fiscal second quarter (ended May 31), net debt is still more than $27 billion.
Management is taking many actions to reduce it, including paying off its highest-interest notes and refinancing more at better rates, and the situation is improving. The ratio of net debt to adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) improved from 4.1 in the first quarter to 3.7 in the second quarter, and the stock got upgraded from both S&P Global and Fitch. If interest rates do go down again, the company will be able to refinance at even better rates and pay off the debt more quickly.
Carnival stock is still cheap today, trading at 1.6 times trailing-12-month sales, well below pre-pandemic levels, and the stock remains 56% off of all-time highs. As the financial situation improves, Carnival stock, which is up 93% over the past year, should soar even higher.
