Title: The Top Gaming at Sea Experience: Carnival vs. Royal Caribbean
Title: The Top Gaming at Sea Experience: Carnival vs. Royal Caribbean
Cruise giants Carnival and Royal Caribbean claim the top spots in the industry, with both companies boasting record bookings this year. Despite racking up substantial debts during the pandemic-induced shutdown, they've managed to pay off and reduce their debt loads, while also funding new ships to accommodate surging demand.
However, this triumph leaves investors in the dark about which cruise line stock will deliver the best returns. A closer look at both companies is warranted to ascertain the most promising investment.
The Carnival Case
Carnival, accounting for 43% of all cruise passengers, is the undisputed beneficiary of high cruise demand. Its strong bookings for 2025 mean it doesn't have to rely heavily on cabin discounts. This situation is reflected in its impressive $19 billion revenue for the first nine months of fiscal 2024, a 18% increase over the previous year. Despite slower growth in operating expenses, net income reached $1.6 billion in the same period, a significant leap from a $26 million loss the year prior.
Carnival's debt situation has also improved. Although its total debt stands at $29.6 billion, it has managed to lower this figure by $1.7 billion over the past nine months. This progress puts it in a strong position to cover $2.2 billion in debt due over the next year, reducing the need for refinancing. Moreover, Carnival can invest over $4 billion to expand its fleet, allowing it to capitalize on the increased demand.
These improvements may explain the 70% surge in the stock price over the last year. With a relatively low P/E ratio of 24, Carnival's financials continue to improve, making it an attractive investment option for investors.
The Royal Caribbean Perspective
Although Royal Caribbean trails behind Carnival with a 26% market share, it too benefits from strong bookings for 2025, albeit at higher prices compared to previous years. This strategy has helped boost its revenue to $13 billion for the first nine months of 2024, an impressive 20% increase year over year. Its net income has also shown significant growth, reaching $2.3 billion in the first three quarters of 2024, up 64% from the same period in 2023.
Royal Caribbean's debt situation is also improved, with a total debt of $21.4 billion, down by $600 million over the past nine months. At this rate, it may not be able to pay off all its $1.9 billion in current portion of long-term debt, but it can surely reduce the amount it needs to refinance. It has also invested $2.7 billion in property and equipment purchases over the past nine months, adding a ship to its fleet to cater to the rising demand in the industry.
This impressive growth has driven the stock price up by 125% over the past year. Although its P/E ratio has risen to 26, it aligns with Norwegian Cruise Line Holdings' P/E ratio of 25 times earnings, keeping Royal Caribbean's valuation largely in line with its competitors.
Carnival or Royal Caribbean: Which to Choose?
With record bookings and decreasing debt levels, both companies and their stocks are poised for continued success. Nonetheless, under present conditions, Carnival appears to hold the upper hand.
While Royal Caribbean's stock price has grown faster recently, Carnival's ability to pay off debt as it matures and continue expanding its fleet demonstrates financial stability. When considering these benefits in addition to its lower P/E ratio, Carnival stock appears to offer the best investment opportunity.
The text discusses the financial performance of Carnival and Royal Caribbean, two major cruise lines, revealing that both companies have recovered well from the pandemic's impact, with strong bookings, improved debt situations, and significant revenue growth. This success has led to a surge in their stock prices, 70% for Carnival and 125% for Royal Caribbean.
However, despite Royal Caribbean's faster stock price growth, Carnival's financial stability, demonstrated by its ability to pay off debt and expand its fleet, makes its stock an attractive investment opportunity, given its lower P/E ratio compared to Royal Caribbean and its competitors.