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Carnival (NYSE: CCL) (NYSE: CUK) has sailed through this year, reporting record revenue, soaring demand, and progress toward its long-term targets. The stock price has followed, with the shares heading for a gain of more than 35%.

This is particularly impressive considering the cruise giant's difficulties during the early pandemic days. The health crisis temporarily halted sailings, and as a result, Carnival shifted to a loss and debt ballooned.

But in recent quarters, the world's biggest cruise company has shown that it has what it takes to get past those difficult times -- and vacationers still love cruising. After such an increase this year, though, you may be wondering if Carnival will continue to advance in the coming months or if growth might taper off. Is Carnival a buy, a sell, or a hold in 2025?

Carnival's turnaround

First a bit of background on Carnival's situation over the past few years. As mentioned, the early pandemic days were rough for the company and pushed it to make several changes that today are bearing fruit. It reorganized its fleet, eliminating older ships and replacing them with more fuel-efficient ones. It also controlled its capacity growth, designed fuel-efficient routes, and focused on increasing vacationers' on-board spending.

Carnival also introduced its SEA Change plan last year, outlining a set of performance goals to be reached by 2026. These include more than a 20% reduction in carbon intensity, compared with 2019, and a 50% increase in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in relation to passenger capacity, compared to June 2023 guidance. The cruise giant also aims to more than double its return on invested capital (ROIC) from 2023 to 2026. In the most recent quarter, Carnival said it was "firmly on the path" to these goals.

Speaking of the recent quarter, the results offer investors reason to be optimistic. The company reported a 60% increase in net income year over year to $1.7 billion. And revenue, operating income, and the company's advanced booked position each hit records. Revenue and operating income came in at $7.9 billion and $2.2 billion, respectively, and the advanced booked position for next year has reached beyond last year's record -- and at higher pricing.

For the full year 2024, Carnival forecasts adjusted EBITDA of more than $6 billion and adjusted ROIC of more than 10%.

Aggressively addressing its biggest risk

It's also important to remember that Carnival has been aggressively addressing one of the big risks that's concerned investors -- debt. It peaked at about $34 billion in early 2023, and since that time, Carnival has pre-paid $7.3 billion. And the company says it's well on the path to its goal of approaching investment-grade status by the end of 2026. Carnival's growth in free cash flow should help it continue to pay down debt, keeping this positive momentum going.

Now let's consider valuation. Carnival is more expensive than it was earlier in the year, trading at 14x forward earnings estimates, compared with about 11x. But this still looks reasonable, considering the company's progress in this recovery story -- and if Carnival continues to advance toward SEA Change goals, the shares also could continue to climb.

I also like the trends Carnival is reporting in demand, with booked positions reaching a high, even amid higher prices. This is positive because it shows Carnival has a certain pricing power, and that should favor margins over time.

So, is Carnival a buy, sell, or a hold? I think it's way too early to jump ship (excuse the pun), and miss out on the future chapters of this exciting recovery and growth story. This coming year should be an important one as the company will be at the midpoint of its three-year SEA Change plan.

Carnival stock has plenty of room to run next year and over time, thanks to its success so far at turning a difficult situation around. Today, Carnival stock still is trading well below its price levels of five years ago -- at about $25 a share, versus $50 -- even as revenue is taking off.

All of this means that Carnival makes a great stock to buy in 2025 and hold for the long term.

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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool recommends Carnival Corp. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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