3 reasons Carnival stock could double again in 2024

It was a “love ship” Carnival Co., Ltd. (CCL 0.67%) Investors this year. The stock price has risen 130% in 2023, heading into the last two trading days of the year. The world’s leading cruise line operator has taken full advantage of the industry’s travel recovery. Can we continue to move in the right direction in 2024?

Of course, there will be difficulties. However, Carnival is well positioned to continue to beat the market going forward. Let’s take a look at some reasons why cruise ship stock metrics could double again in 2024.

1. Momentum is strong for fiscal 2024

Carnival ended its 2023 fiscal year on another encouraging note last week. Sales soared 41% to a new fiscal fourth quarter record of $5.4 billion, exceeding previous guidance. The top result also set a new record high. That means revenue has already more than recovered to pre-pandemic levels.

The cruising fan is back. Carnival’s occupancy rate in the most recent quarter topped 101%, and customers are willing to spend more on water fun than before the 2020 lockdown. Net revenue per day (an industry metric that calculates the average net revenue per passenger for each cruise day) for North American brands increased by double digits compared to 2019 for Carnival.

It’s not just the three months ending in November that look promising. Carnival is reserving the pond for fiscal year 2024. The company now has a total of $6.4 billion in customer deposits on its books for future sailings, 25% more than the previous four-quarter record set last year.

Last month, reservations for two weeks, including Black Friday and Cyber ​​Monday, set a new Carnival record. In short, Carnival is doing well, and fiscal 2024 is expected to be even better.

Image source: Getty Images.

2. The beat is getting better.

This isn’t just the best success story. Actual profitability will not return to pre-pandemic levels. Like its sea-splashing peers, Carnival has had to do many desperate things to survive during the prolonged COVID-19 lockdown. We had to take on new debt at high interest rates. New shares were issued at a low price. It will be a while before Carnival sets a new record for earnings per share.

However, one thing that this scalable model clearly improves is the ability to stay ahead of Wall Street profit targets. Carnival has consistently surpassed analyst expectations, and the gap continues to grow with each passing report.

Data source: Yahoo! Jae Won. EPS = earnings per share.

Yes, Carnival posted a quarterly loss last week. Three months ago, after 14 consecutive quarters of deficit, it ended in surplus for the first time since 2019. Nevertheless, the small net loss this time is not a problem. This is a seasonal business. Carnival stock has more than doubled this year as the company is well ahead of where investors thought it would be at this point a year ago.

3. Stocks are cheaper than you think

Many of the stocks doubling in 2023 are trading at generous forward multiples, but Carnival doesn’t seem to be as expensive as its stock chart or trailing financials suggest. Carnival is trading at a reasonable 19 times projected earnings for the new fiscal year, which started earlier this month. Looking ahead to fiscal 2025, the revenue multiple falls below 14.

Have you seen how Carnival continues to make Wall Street pros look like serial lowballers by making math better? There’s a good chance the cruise line will beat its current revenue forecasts over the next two years.

Carnival also helps you create your own luck. It may not have barely broken even on an adjusted basis for the full fiscal year 2023, but it is generating plenty of free cash flow. Carnival has more than $30 billion in debt, which gives it enormous leverage.

But it has already paid off $5 billion compared to its peak in the first quarter of fiscal 2023. We expect to continue reducing our debt in 2024. As the global travel market continues to struggle, Carnival and the rest of its peers should be able to continue to move higher in 2024.