Don’t Look Now, But Carnival Corp Is an Appealing Option

CCL stock - Don’t Look Now, But Carnival Corp Is an Appealing Option

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When it comes to cruise ship stocks, Carnival (NYSE:CCL) stock has never been my favorite. I’m sure the ships are just lovely and people have a grand time on vacations. But when Covid-19 hit in 2020 and I went bottom-fishing for a good buy on cruise stocks, Royal Caribbean Cruises (NYSE:RCL) stood out as a better buy.

And so far, that’s paid off. After the bottom fell out of cruise stocks in March 2020, RCL gained back the most profit, rising roughly 86% in its recovery. Norwegian Cruise Lines (NYSE:NCLH) is in second place with a 40% gain, and Carnival brings up the rear with about a 20% gain. When I cashed out my RCL stock in August 2021, I had a gain of roughly 130%.

But now there’s some new variables in play. And I’m starting to think that CCL stock may now be the best cruise line play for 2022.

Hear me out.

First, to invest in cruise stocks, you have to believe in the business — even if you have no interest in taking a cruise. Before the pandemic hit, the Cruise Lines International Association said the number of passengers who took global cruises jumped from 17.8 million in 2009 to 30 million in 2019.

Cruising is really popular — particularly with the Generation X crowd that has plenty of money to spend on cruises. And they have lots of incentive to get out of the house after two years of lockdown.

So, I’m convinced that cruising will come back in a big way.

Now, let’s take a look at our three cruise stocks. While RCL has the best recovery since the pandemic began and CCL stock the worst, all three names are still badly damaged. Royal Caribbean remains 54% off its pre-pandemic level. NCLH is 72% off, and Carnival stock is about 74% from its pre-pandemic high.

That tells me that Carnival has the most remaining upside of the three cruise stocks.

And finally, there’s some extra reason for optimism. Carnival successfully launched its Carnival Splendor ship from the Port of Seattle earlier this month. That’s notable because it makes Carnival the first major cruise line to get its entire fleet of ships back out at sea since the pandemic began.

That’s an achievement. And its also profitable, because only through making booking and completing cruises can cruise lines make money. And Carnival is now in the best shape of the major cruise lines to do that because it has all its ships back in the water.

Now, I don’t think that Carnival will shoot higher right away. There are plenty of pressures on stocks in general, and rising inflation and interest rates mean that some people will have less money to spend on cruise vacations.

But I’m cautiously optimistic that CCL stock is set up now for a nice little run higher. And I think it will outperform other cruise stocks over the next year or so.

On the date of publication, Patrick Sanders did not have (either directly or indirectly) any other positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Patrick Sanders is a freelance writer and editor in Maryland, and from 2015 to 2019 was head of the investment advice section at U.S. News & World Report. Follow him on Twitter at @1patricksanders.

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