Carnival vs Royal Caribbean: which is the best cruise stock to buy?

April 21, 2024 07:02 PM PDT | By Invezz

Carnival vs Royal Caribbean: which is the best cruise stock to buy? — Image source: Invezz

Recovery of the cruise industry

Royal Caribbean and Carnival are two of the biggest cruising companies in the world with an enterprise value of $55 billion and $47 billion, respectively. Norwegian Cruise Lines comes a distance third with a valuation of over $22 billion.

These companies have been in the spotlight in the past few years as investors assess their recovery after the Covid-19 pandemic. At the time, these firms became toxic wastelands as governments shut them down since they are seen as non-essential.

And unlike airlines that received billions of dollars in bailouts, the firms received nothing because they are registered in tax havens. As a result, they all raised substantial sums of money by selling equity. They also boosted their total debt to stay afloat.

Royal Caribbean’s total long-term debt jumped from $8.2 billion in 2019 to over $17.9 billion in 2020. It peaked at over $20 billion in 2022. Further, the company’s total outstanding shares have jumped from 209 million in early 2020 to over 256 million today. Its maturities for 2024 stand at $1.7 billion followed by $2.6 and $3.6 billion in 2025 and 206, respectively.

Carnival raised more money than Royal Caribbean. Its total long-term debt jumped from $9.6 billion in 2019 to over $22 billion in 2020 and peaked at over $31 billion in 2022. Its long-term debt stands at $28.5 billion today. Royal Caribbean’s

Carnival has reduced some of its long-term debt. According to its 10k report, the company will have maturities of over $2 billion this year followed by $2.2 billion, $3.1 billion, $6.28 billion, and $8.9 billion in the next four years, respectively.

Carnival vs Royal Caribbean

Debt and maturities are a big concern for Royal Caribbean but I believe that the two companies are in a good shape unless a black swan event happens. For one, these two countries are reporting record bookings and revenues as the cruise industry rebounds.

Carnival’s annual revenue jumped from $12.1 billion in 2022 to over $21.59 billion in 2023. Similarly, Royal Caribbean’s revenue soared from $8.8 billion to $13.9 billion. Its total net profit jumped to over $1.68 billion.

Fundamentally, Royal Caribbean is a better investment because of its simple business model. It only has Royal Caribbean, Celebrity Cruises, and Silversea Cruises. The company also owns part of TUI and Hapag-Lloyd Cruises. Most importantly, Royal Caribbean mostly targets American customers.

Carnival, on the other hand, is a more diversified company that resembles a conglomerate. It owns its eponymous Carnival Cruise Line and several other brands like Princess, Holland, Seabourn, Cunard, AIDA, Costa, and P&O Cruises.

This diversification is a good thing. However, it also creates more layers and complexity, which can hurt its margins. The most recent results showed that Carnival had an EBITDA margin of 21.23% while Royal Caribbean had 31%. Its return on equity stood at 6.30% against Royal Caribbean’s had 43%.

Therefore, if your goal is to invest in cruise lines, I believe that Royal Caribbean is the better option. Nonetheless, Carnival has room to bridge the performance gap this year as its performance improves.

The post Carnival vs Royal Caribbean: which is the best cruise stock to buy? appeared first on Invezz

Disclaimer

The content, including but not limited to any articles, news, quotes, information, data, text, reports, ratings, opinions, images, photos, graphics, graphs, charts, animations, and video (Content) is a service of Kalkine Media LLC., having Delaware File No. 4697309 (“Kalkine Media, we or us”) and is available for personal and non-commercial use only. The principal purpose of the Content is to educate and inform. The Content does not contain or imply any recommendation or opinion intended to influence your financial decisions and must not be relied upon by you as such. Some of the Content on this website may be sponsored/non-sponsored, as applicable, but is NOT a solicitation or recommendation to buy, sell or hold the stocks of the company(s) or engage in any investment activity under discussion. Kalkine Media is neither licensed nor qualified to provide investment advice through this platform. Users should make their own enquiries about any investments and Kalkine Media strongly suggests the users to seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice), as necessary. Kalkine Media hereby disclaims any and all the liabilities to any user for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising from any use of the Content on this website, which is provided without warranties. The views expressed in the Content by the guests, if any, are their own and do not necessarily represent the views or opinions of Kalkine Media.
The content published on Kalkine Media also includes feeds sourced from third-party providers. Kalkine does not assert any ownership rights over the content provided by these third-party sources. The inclusion of such feeds on the Website is for informational purposes only. Kalkine does not guarantee the accuracy, completeness, or reliability of the content obtained from third-party feeds. Furthermore, Kalkine Media shall not be held liable for any errors, omissions, or inaccuracies in the content obtained from third-party feeds, nor for any damages or losses arising from the use of such content. Some of the images/music that may be used on this website are copyrighted to their respective owner(s). Kalkine Media does not claim ownership of any of the pictures/music displayed/used on this website unless stated otherwise. The images/music that may be used on this website are taken from various sources on the internet, including paid subscriptions or are believed to be in public domain. We have used reasonable efforts to accredit the source (public domain/CC0 status) to where it was found and indicated it, as necessary.
This disclaimer is subject to change without notice. Users are advised to review this disclaimer periodically for any updates or modifications.