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Although the FTSE 250 has fallen steadily over the past month, one growth share in the index has risen nearly 30% over the same period. A clear divergence not only makes me interested in seeing what led to the move, but it can also give me a strong stock to buy to give my portfolio a boost to end the year.
A brief backstory
The stock I am referring to is Carnival (LSE: CCL). Investors will remember that the world's largest cruise line operator was hit hard during the violence. Closed vessel slots and cruise closures meant that revenue dried up almost overnight. As a result, it had to take on huge debt to survive.
Although restrictions were eased and business was able to continue, many people (myself included) were wary of buying the stock. Although it looked very cheap in 2022, I was concerned that the company might not return to pre-pandemic levels.
It is true that the share price is still down 53% in the last five years. This shows that the damage of the epidemic has not been eradicated. But there seems to be a change in the air, as the stock is up 55% in the past year, including this latest surge.
A short-lived pop
At the end of September, the business released a very strong set of quarterly results. The CEO was incredibly excited. He noted that business “delivered an incredible third quarter, breaking performance records and performing best ever”.
Total revenue was $1.7bn, a jump of $662m from the same quarter last year. Q3 revenue hit a record high of $7.9bn, indicating that consumer demand is definitely there. Carnival benefits from higher ticket prices but still sells cruises, an ideal combination that is reflected in the financial results.
Q3 figures mean it has raised EBITDA guidance for the full year 2024 to around $6bn. If observed, this would be more than 40% compared to 2023.
Naturally, the share price responded positively to these results that day. However, it also means that the stock has continued to jump since then. This shows me that there is momentum behind this journey, which indicates that it may continue in the coming months.
Long term future
I put off buying Carnival shares for a long time as I didn't feel comfortable. But recent results and share price movements give me more confidence to consider getting involved.
Of course, the ongoing danger is a lot of debt. Long-term debt currently stands at $26.6bn, slightly lower than last year's $28.5bn. I think this needs to be more focused, as the continued high interest rate makes the cost of repayment greater.
While I won't be buying yet, my view of the stock has completely changed. I think there's a lot of growth potential ahead, but I want to wait a little longer to make sure this isn't a flash-in-the-pan move.
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