Ah, the new year. The time of resolutions that we don't usually keep. Well, I have a good resolution for you this year. Invest in long-term stocks! It's still a strategy that consistently produces good results, and is much easier on your mental health than trying to constantly time the market and trade stocks.
In the spirit of the new year, I've put together two stocks that I think might be good long-term plays.
Carnival Cruise Lines
It's safe to say that Carnival(NYSE: CCL) absolutely took it in the teeth during the COVID-19 pandemic. The cruise line juggernaut saw its revenues slashed by over 73% in 2020, and 65% in 2021. Since then, in conjunction with the stabilization of travel, Carnival has been digging itself out of a hole that no one saw coming. Consequently, the stock has a five-year return of negative 51%.
More recent results lead me to think there's potential here. We've already seen the stock rally more than 40% over the last 12 months, and I think it's just getting started.
The company saw strong recent fiscal fourth-quarter results, including net income of more than $300 million versus a net loss of $48 million in fiscal 2023. This was driven by record fourth-quarter revenues of $5.9 billion. The company seems to be turning the page on what has been a five-year headache for a great deal of investors. On a full-year fiscal basis, Carnival reported revenue growth of 15% year over year to a record $25 billion, with full-year net income of $1.9 billion.
Guidance for the coming year seems strong, with expectations for 2025 adjusted net income to be over 20% higher than 2024. The company has beaten estimates over the last four quarters, and analyst estimates for fiscal 2025 are showing the company reporting earnings of $1.75 per share, giving the company a P/E ratio of 14.73 times forward earnings.
The demand for cruise ships has completely bucked my earlier thoughts on the sector, given the growth we've seen in Carnival and its anticipated results for 2025. Those who hopped on this stock in August have already seen gains of over 40%, and I don't think the show is over yet -- not while guidance and demonstrated momentum remain strong.
On Holding
In the last few weeks we've heard a lot of chatter about Nike amid an earnings report and "refocus" from the new CEO to get the brand back to focusing on sports. This is all well and good, but On Holding(NYSE: ONON) has been creating growth that puts Nike to shame, and I think it can keep going. The Switzerland-based sports shoe/apparel company has been outpacing bigger competitors like Nike and Under Armour, and creating some pretty meaningful results.
In its most recent quarter, On Holding reported revenue (represented by net sales on its financial statement) of 635.8 million Swiss francs, a year-over-year increase of 33.2%. On a U.S. dollar basis, that was $733.8 million at the time. I challenge investors to find many companies in the sports shoe/apparel business creating that kind of quarterly revenue growth.
Looking past revenue growth alone, On Holding has demonstrated a balance of improving characteristics across the business. These include a 43.6% increase in net income (on a Swiss currency basis) through the first three quarters of the year, amounting to $173 million, and an 88% increase in cash on the books, totaling nearly $888 million on the balance sheet.
Raising its full-year 2024 net sales growth outlook to at least 32% on a constant currency basis, coupled with an anticipated beat on full year profitability, On Holding seems primed to continue its delivery for shareholders. I know it's an expensive stock relative to something like Nike, but it's also delivering results that drastically outpace Nike.
Looking ahead to 2025, I think these two stocks hold strong potential. Carnival seems back on track in terms of driving top-line growth. If I were to critique one thing about the cruise line company, it has only recently (within the last few quarters) gotten itself back to profitability. But as Fool.com contributor Jennifer Saibil points out, Carnival is reducing debt and has achieved stronger free cash flow. As long as that holds up, I think the stock can go higher.
For On Holding, the one red flag is valuation, as the stock trades at well over 100 times earnings. The thing is, On Holding isn't quite a company that you expect to move based on earnings yet. It is the quintessential growth stock, so top-line growth holds more sway right now. I do like to see that the company is producing profits, though.
Here's to a great 2025.
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David Butler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nike. The Motley Fool recommends Carnival Corp., On Holding, and Under Armour. The Motley Fool has a disclosure policy.
