Best Stock to Buy Right Now: Carnival vs. Roblox

The article contrasts Carnival (CCL) and Roblox (RBLX), detailing their pandemic-era performance and subsequent recoveries. Carnival, which overcame an existential crisis to return to profitability in fiscal 2024 with revenue exceeding pre-pandemic levels and a projected 24% EPS CAGR, is now seen as a bargain at 11x next year's earnings. In contrast, Roblox, despite thriving during lockdowns and recently regaining strong bookings and user growth, is expected to remain unprofitable due to high expansion costs. While Roblox historically outperformed in stock returns, the analysis concludes Carnival is the superior investment due to its profitability and attractive valuation.

Analysis

Carnival (CCL) has demonstrated a robust recovery from its pandemic-induced "existential crisis," with fiscal 2024 revenue projected to reach $25 billion, surpassing its pre-pandemic 2019 level of $20.8 billion. The company successfully returned to profitability in fiscal 2024 with a $1.9 billion net profit, significantly reducing its debt from a peak of $33.2 billion to $27.5 billion, aided by refinancing at lower rates. This operational turnaround, driven by increased occupancy and higher per-customer spending, underpins an anticipated 24% EPS compound annual growth rate (CAGR) from fiscal 2024 to 2027.

Conversely, Roblox (RBLX), while experiencing explosive growth during pandemic lockdowns with bookings surging 45% and DAUs jumping 40% in 2021, faced a subsequent slowdown as restrictions eased. Despite a recent rebound in bookings (23% in 2023, 24% in 2024) and DAU growth to 85.3 million by fiscal 2024, the company is still expected to remain unprofitable. This unprofitability stems from high capital expenditures related to infrastructure expansion, safety upgrades, and user currency conversions, alongside nearly $1 billion in debt.

The article posits Carnival as the "better buy" despite Roblox's historical stock outperformance (33% vs. 9% over four years) and higher projected bookings CAGR of 31% for RBLX. Carnival's attractive valuation at 11 times next year's earnings, coupled with its proven profitability and debt management, contrasts with Roblox's 9 times next year's bookings valuation and persistent unprofitability. This suggests a preference for established profitability and value over high-growth, capital-intensive models.

Key Decisions for Investors

• Investors should consider Carnival (CCL) for its compelling valuation at 11x next year's earnings and its return to profitability, alongside a projected 24% EPS CAGR, indicating a strong recovery and future growth trajectory.
• Monitor Roblox's (RBLX) path to profitability and its ability to manage high capital expenditures, as its current valuation at 9x next year's bookings is less attractive given its ongoing unprofitability.
• Evaluate the long-term sustainability of both business models, weighing Carnival's established market position and debt reduction against Roblox's growth potential versus its capital intensity and lack of current profits.