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Proprietary Data Insights Financial Pros’ Top Cruiseline Stock Searches in the Last Month
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Financial Elites’ Top Cruiseline Stock of 2024 |
In 2021, no one knew whether the cruise industry would survive. Covid-19 protocols forced Carnival Corp. (CCL), the largest operator, to moore 87 ships for over a year. To survive, the company added $25.6 billion in debt over three years, almost triple what it had on the books in 2019. Today, the company’s 92 ships are filled to the brim with passengers, generating $4.2 billion in cash from operations, allowing it to grind down that debt load and eat into the extra $1 billion in annual interest expenses.
Source: Carnival Q4 2023 Investor Presentation According to our TrackStar data, money managers sifted through travel stocks, landing on Carnival with far more frequency than in the last few months. The stock is still down 67% from its collapse in 2020, and 77% from its all-time-highs. We have found a few reasons why you can expect the financial picture to improve dramatically in the next 24 months. Carnival’s Business With sailings in North America, Australia, and Europe, Carnival is the world’s largest cruise line operator. Its capacity is 257,930 passengers, a number expected to grow by 2.6% in 2024. Carnival operates under several brands including:
Each caters to a different consumer, such as Holland and Princess which are geared more towards adults and retirees while Carnival’s namesake is a vacation hub for families. The company’s revenues break down into ticketing (⅔ of sales) and onboard (⅓ of sales). Carnival’s done an exceptional job introducing new customers to cruise travel and increasing total onboard spend through presale offers.
Source: Carnival Q4 2023 Investor Presentation All this has led to an occupancy percentage of greater than 101% which is expected to continue in 2024. Financials
Source: Stock Analysis Margins have rapidly improved as ship utilization increased. If not for the higher interest and depreciation, the company would be profitable. However, it does generate positive cash from operations, $4.3 billion to be exact, with a Capex of $3.3 billion, leaving them $1 billion to pay down debt. Capex is expected to grow to $4.2 billion in 2024, up from $3.3 billion in 2023, before falling to $2.8 billion in 2025 and $1.8 billion the following year. That decrease will free up $3-$5 billion per year to reduce debt, putting the company on firmer financial footing. Valuation
Source: Seeking Alpha Of the three major cruise lines, Norwegian Holdings (NCLH) trades at the highest P/E multiple, as it also has a heavy amount of debt. However, Royal Caribbean (RCL), which is arguably in the best financial position, trades at 7.4x cash, nearly twice that of its peers. No matter which you look at, all are incredibly cheap by historical standards. Growth
Source: Seeking Alpha After a blockbuster year in 2023, all the cruise operators expect revenues to ease the incredible growth. Yet, they’re all still projecting near 30% revenue increases as customers spend more and more capacity comes online. Profitability
Source: Seeking Alpha Interestingly, Carnival runs the highest gross margins, though not the best EBIT or net income margins. While its operations are humming along, it still faces non-cash depreciation expenses and high interest payments. Our Opinion 10/10 We feel that Carnival offers a fantastic long-term opportunity here. The company has plans in place to pay off its debt while growing capacity. Sure, it may take a few years to get things back where they were. But the stock is down so much that you’re getting it at firesale prices. |
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