As some of the few travel stocks that have failed to fully recover from the pandemic, plenty of investors have tried to bottom-fish in cruise-line names like Carnival (NYSE:CCL) stock. Unfortunately, these contrarian wagers have failed to pan out.

Investors who have dabbled in CCL or its peers haven’t reaped substantial gains. Instead, going against the grain has led to heavy losses. Although the industry is in a much better place now compared to last year, cruise lines have a way to go before attaining pre-virus revenue and earnings levels.

Worse yet, this recovery, which has arrived far more gradually than the recovery for airlines, hotels, and casinos, is likely to be further stretched out by factors outside the pandemic. Put it all together, and it’s doubtful that this stock, despite being down more than 85% since 2020, has enough rebound potential to outweigh its still-high level of risk.

CCL Stock Faces New Headwinds

When the Covid-19 “reopening” took shape in 2021, there were high expectations that Carnival and other cruise lines were en route to a comeback. At the time, the thought was that “pent-up demand” from lockdowns would result in a rapid recovery in cruise bookings enabling the company to quickly get back out of the red.

However, while Covid-19 headwinds have largely left the scene, two new headwinds have emerged since last year for Carnival.

First, inflationary pressures have affected the company, and not just in terms of its operating costs.

Besides resulting in a big jump in Carnival’s fuel, food and other costs, inflation’s squeezing of household budgets is also hurting cruise demand. That’s why the company is currently offering some trips to passengers at rock-bottom prices.

Related to these inflationary pressures, is Carnival’s second big headwind: the growing chances of a recession. If the company is having to offer cut rates to passengers during a time of low unemployment and rising wages, you can imagine how much things could worsen in the event of an economic downturn.

What This Means for CCL Moving Forward

Four quarters in a row, Carnival has missed analyst earnings forecasts by a considerable margin. The sell-side continues to walk back its estimates. For example, just a month ago, analysts were anticipating losses of 27 cents per share for CCL for its fiscal fourth quarter (ending November 2022).

Today? Forecasts call for losses of 82 cents per share this quarter. For the next fiscal year, the forecast is again hardly promising. Sure, earnings forecasts for fiscal years 2023 and 2024 are far better than full-year fiscal 2022 results.

The next two years call for earnings per share of around 44 cents and $1.26, respectively, as opposed to fy2022 losses of $4.58 per share.

But even if Carnival manages to deliver results in-line with these estimates, forget about a return to its pre-Covid stock price (around $50 per share). A return to its 2021 highs (around $30 per share) may be unattainable. At best, it may be able to sail back to the mid-teens per share over the next two years.

The CCL Stock Takeaway

CCL could in theory climb back to around $15 per share within two years, but whether this happens is debatable. Sell-side forecasts aren’t set in stone. Today’s estimates may be too optimistic about the impact of a recession on Carnival’s operating results in 2023 and 2024.

That’s not all. If a recession delays a return to profitability, Carnival may end up having to raise more capital (and dilute shareholders) through an equity raise, as it’s done many times since 2020 to stay afloat. Additional dilution will put more pressure on shares, and limit long-term upside.

As its risk-reward proposition remains unfavorable (despite its low price), avoid CCL stock.

CCL stock earns a D rating in Portfolio Grader.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.