Carnival Stock Is Up 75%. Is It Time to Sell?

Carnival (NYSE: CCL) (NYSE: CUK) finished 2024 in a solid financial position. It reported record revenue and returned to profitability, and the stock responded by climbing 75% over the last 12 months.

Investors who bought the stock a year ago might be tempted to take profits, but there's tremendous demand for cruises that could drive more growth for Carnival. Investors who sell might leave gains on the table.

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Here's why Carnival shares can hit new highs in 2025.

Demand is pushing cruise prices up

Carnival reported a record $25 billion in revenue last year, an increase of 15% year over year, as the travel industry continued to return to pre-COVID demand trends.

One factor that is driving demand is that consumers are choosing to spend more money on experiences rather than goods. This could continue to drive cruise pricing higher, which is still relatively low compared to the value of land-based experiences.

On the recent earnings call in December, management said that both price and occupancy for all four quarters of 2025 are higher. Bookings accelerated last quarter despite the company having less inventory for sale right now compared to a year ago.

Carnival's pricing power is one reason that investors should hold the stock, and new investors might even consider starting a small position. Carnival's North American and European segments are seeing their longest advanced booking windows on record.

Higher prices and revenues bode well for the company's earnings growth. After reporting a $74 million net loss in fiscal 2023, Carnival's net income jumped to $1.9 billion in fiscal 2024.

Catalysts for earnings growth

Besides strong demand and pricing trends, there are two other important catalysts that can boost the company's share price.

Carnival paid down a significant amount of debt last year, which saved the company over $300 million in interest expenses. As the business continues to grow revenue and profits, Carnival should have more cash on hand to keep reducing debt and interest, and therefore boost earnings.

And later this year, Carnival will open its exclusive destination, Celebration Key. The new attraction will be a profitable revenue opportunity for the company, since the Key is positioned close to the company's ports, which will save fuel costs.

The stock still offers value

The main risk is the economy. Consumers have already been dealing with high inflation and interest rates over the last few years, yet Carnival has reported growing revenues over that time. Consumers are placing a high value on experiences, and that should continue to benefit leading cruise brands. Long term, the travel industry is projected to grow under 4% per year to reach $1.1 trillion by 2029, according to Statista.

The Wall Street consensus has the company's earnings reaching $2.36 by fiscal 2027. But estimates have been trending higher, which is a bullish sign for the stock's prospects. The shares are trading at a reasonable forward price-to-earnings ratio of 16 on this year's consensus estimate.

With the cruise industry on the upswing, the stock will likely continue to climb along with Carnival's underlying earnings growth. There are several catalysts from demand, pricing, debt reduction, and new attractions to send the stock higher over the next few years.

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John Ballard has no position in any of the stocks mentioned. The Motley Fool recommends Carnival Corp. The Motley Fool has a disclosure policy.