Is Carnival Corp. (CCL) a Buy in 2025 Amid Recovery Momentum and Valuation Discounts?

Carnival Corporation (CCL), the world's largest cruise operator, has emerged as a compelling long-term investment opportunity in 2025. Amid a post-pandemic recovery in global travel demand and a strategic fleet revitalization, the company is poised to capitalize on structural tailwinds while trading at a significant discount to its intrinsic value. This analysis evaluates CCL's growth potential through the lens of its fleet modernization, robust demand trends, and undervalued financials, arguing that the stock offers a rare combination of near-term resilience and long-term upside.

Fleet Revitalization: A Catalyst for Sustained Growth

Carnival's fleet strategy is a cornerstone of its competitive positioning. The company has announced the delivery of Carnival Festivale and Carnival Tropicale, two Excel-class ships in 2027 and 2028, respectively, featuring cutting-edge amenities such as music-themed zones, expanded family spaces, and the Carnival Waterworks Ultra water park according to Carnival News. These vessels are part of a broader Project Ace initiative, which includes three LNG-powered ships - each with over 3,000 staterooms and capacity for nearly 8,000 guests - scheduled for delivery in 2029, 2031, and 2033. These ships will be the largest in Carnival's fleet and represent a strategic shift toward sustainability and scale.

Complementing these newbuilds, Carnival has also enhanced its existing fleet through renovations. For instance, the AIDA Evolution program, which recently completed its first phase on the AIDAdiva, will be extended to six additional ships over the coming years. Such upgrades not only improve guest experiences but also extend the lifecycle of older vessels, ensuring they remain competitive in a market increasingly driven by premium amenities.

Strong Demand Trends and Pricing Power

Carnival's ability to balance supply and demand is a critical factor in its long-term success. In the third quarter of 2025, the company reported 8% higher bookings compared to the same period in 2024, despite minimal near-term capacity additions. CEO Josh Weinstein highlighted that nearly half of 2026's capacity is already booked, underscoring the industry's structural shift toward premium offerings and the company's ability to command higher prices.

This pricing power is further reinforced by the limited supply of new cruise capacity. While Carnival's annual capacity growth between 2025 and 2033 is projected at 1.5%, the company's new ships - particularly the Project Ace vessels - will introduce significant incremental capacity in the late 2020s. This staggered approach allows Carnival to align supply with demand, avoiding the overcapacity risks that plagued the industry during the 2020–2022 downturn.

Financial Turnaround and Valuation Discounts

Carnival's financials tell a story of recovery and undervaluation. A discounted cash flow (DCF) analysis using current free cash flow of $1.46 billion and projected growth to $3.94 billion by 2029 estimates an intrinsic value of $30.53–$31.06 per share, a 12.7% to 16.8% discount to its current market price. This suggests that the market is underestimating the company's long-term cash-generating potential, particularly as new ships come online.

Equally compelling is Carnival's price-to-earnings (PE) ratio of 12.6x–15.9x, which lags significantly behind the 20.59x–24.5x average for the broader hospitality sector and its peers' 20.6x–26.9x range. Simply Wall St's proprietary Fair Ratio, which accounts for Carnival's unique fundamentals, ranges from 27.51x to 29.7x, further highlighting the stock's undervaluation. These metrics indicate that Carnival is trading at a discount relative to both its earnings and industry benchmarks, offering a margin of safety for long-term investors.

Strategic Entry Point for Long-Term Investors

The convergence of undervaluation, strong demand, and a disciplined fleet strategy positions Carnival as a strategic buy in 2025. While the company's near-term capacity growth is modest, its pipeline of large, innovative ships - coupled with a focus on premiumization and sustainability - creates a durable competitive advantage. Additionally, the current valuation discounts appear to underprice the company's ability to capture market share in a sector where demand is outpacing supply.

For investors seeking exposure to the travel recovery, Carnival offers a rare combination of defensive characteristics (strong pricing power, recurring demand) and offensive potential (fleet modernization, scale expansion). As the company prepares to welcome the Star Princess in 2025 and accelerates its Project Ace initiative, the stage is set for a multi-year growth trajectory.