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All aboard! Carnival stock ready for smooth sailing

Cramer: Carnival's magnificent turnaround

There was a time not long ago, when Jim Cramer only associated the word "disaster" to Carnival Cruise Lines. Between a ship sinking, engine room fires, sick passengers—it seemed the company was doomed.

So how the heck did Carnival make such a turnaround that its stock keeps hitting new high after new high?

When investors take a look at where the stock bounced back from, it makes this turnaround story even more impressive. First there was the Arab Spring in 2011 that caused huge disruptions to the company's cruise business in the Middle East and North Africa, along with the tragic Japanese tsunami.

In 2010 through 2012, the price of oil went through the roof, and in 2012 one of its cruise ships sank off the coast of Italy, causing 32 deaths. In 2013, one of its ships had an engine room fire, which caused the ship to float adrift in the Gulf of Mexico for four days—total public relations nightmare!

Carnival cruise ship Destiny in port in Key West, Fla.
Karen Bleier | AFP | Getty Images

Now some of these incidents have impacted the entire cruise ship industry, and some of them were Carnival specific. Either way, Carnival was clearly hit the hardest.

At its lowest point, the stock traded to approximately $33 a share, but has been steadily making a climb up to the $48 that it closed at on Tuesday.

"There is no question that some of the strength here has to do with a rising tide simply lifting all boats. Obviously Carnival, which is the largest cruise line, and the rest of the industry are huge beneficiaries from the decline in oil prices," the "Mad Money" host said.

But clearly Carnival has done more than just benefit from the decline in fuel costs. To start, the company said it has seen a healthier demand in the Caribbean, which is a big deal since it controls about 50 percent of the market and it has been suffering from a glut of ships.

Additionally, both the European and Chinese cruise markets are looking better, and Carnival expects about one million passengers to hit the seas this year.

Carnival is by far the largest cruise company in the world, and is the most internationally oriented with 42 percent of its revenues stemming from overseas. So while the international cruising environment is getting stronger, Cramer thinks that Carnival is the stock to own.

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Currently the stock trades at just 15 times next year's earnings estimates, which makes it a very cheap stock compared to the average.

"Sure, Carnival gets hurt by the strong dollar, but if I'm right that the greenback's strength could soon be peaking, then that could give this stock still one more leg higher," Cramer said.

So in the next market-wide selloff, Cramer recommended that investors jump in and take advantage of any pullback in the stock. And considering how it keeps reaching new highs, this could be long overdue.

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