Carnival Corp (NYSE:CCL,CUK) looks intriguing at the moment. At $63, CCL is threatening to hit an 11-month low. Yet the cruise industry seems relatively strong at the moment, and even after solid Q4 results Carnival stock trades at less than 15x the midpoint of its fiscal 2018 EPS guidance.

But there are real pressures on Carnival at the moment. Most notably, rising fuel costs portend a headwind to earnings, even though Carnival has some hedges in place. China offers a potential growth driver in the long term, but has been challenging of late. Peers look cheaper on an earnings basis, and in terms of cash flow, CCL isn’t as cheap as its P/E ratio suggests.

To be sure, I’m not quite ready to toss the long-term case for Carnival stock. A reasonable valuation and a 3.1% dividend yield both price in only moderate growth.

And as Lawrence Meyers pointed out earlier this year, Carnival has a number of long-term tailwinds. But I do see short- and long-term challenges that suggest the recent flattish trading in Carnival stock should continue.

Short-Term Challenges for Carnival Stock

Carnival stock has pulled back about 13% from an all-time high reached in late January. A number of factors likely have driven the decline.

For one, dividend stocks across the board have become less attractive, now that Treasury yields have risen toward the 3% level. A number of consumer-facing plays with 3%+ yields have seen even sharper pullbacks. (Procter & Gamble Co (NYSE:PG) is one example; Kimberly Clark Corp (NYSE:KMB) another.)

Secondly, oil prices have risen. Brent crude is at its most expensive level since late 2014. Fuel costs rose 21% year-over-year in Carnival’s fiscal Q1, and presented a double-digit headwind to operating income growth. And, finally, a market clearly more nervous about the macroeconomic picture appears less comfortable with mid-term demand trends.

On all three counts, the caution makes some sense but also could be seen as an overreaction. The dividend yield might be barely above Treasuries, but unlike PG and similar products plays, Carnival isn’t stuck in a growth trap. Oil prices are rising in part because of a weaker dollar, which helps Carnival.

In fact, the impact of currency and oil, including hedges, on full-year guidance actually was increased $0.10 after Q1. And any short-term macro jitters should be offset by a demographic shift into Carnival’s sweet spot, as more baby boomers retire.

But, overall, there are real challenges here. Higher oil prices will mean more expensive hedges going forward, at least. And as sensitive as Carnival profits are to demand, any further market jitters likely will bring CCL stock down even further.

With the near-term concerns likely to hold for a while, at the least I’d expect patient investors should be able to get Carnival stock at a cheaper price over the next few months.

The Long-Term Case for CCL Stock

Meanwhile, from a valuation standpoint, there are two reasons that suggest CCL isn’t quite as cheap as it looks. First, the cruise industry is a capital-intensive business. Carnival’s capex has averaged close to $3 billion the last two years, and it will rise steadily going forward per the Q4 conference call.

But depreciation and amortization is less than $2 billion That means that on a free cash flow basis, Carnival stock is not nearly as cheap as a ~15x P/E multiple suggests, with a normalized P/FCF multiple closer to the high teens.

The second issue is that peers are even cheaper. Royal Caribbean Cruises Ltd (NYSE:RCL) trades at 12x the midpoint of its 2018 guidance, after a 10% sell-off over the past few sessions.

Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH) is in the same ballpark. If an investor wants to make a semi-contrarian bet on the cruise space, those smaller operators, both of whom are projecting strong 2018 results themselves, look more attractive.

All told, it’s difficult to get too excited about Carnival stock at the moment. It’s not a bad play by any means. But short-term trading is likely to be influenced by external factors. And RCL and NCLH look like more attractive bets that those factors – oil, currency, demand – will play out in the industry’s favor.

CCL stock really hasn’t provided much in returns for almost a year now – and I don’t expect that will change any time soon.

As of this writing, Vince Martin has no positions in any securities mentioned.