One of the key plays right now in the market is the so-called “re-opening” stocks. A lot of the stocks hated by investors last year due to the pandemic have now become compelling investment opportunities. One such company is Carnival (NYSE:CCL). The company has seen a remarkable recovery in its stock from the lows of late last year. In a short time, CCL stock rose from around $14 in November last year to its current share price of $28.

Despite the rapid increase in price, I believe there is still upside in CCL stock.

A Recovering Industry

The recovery trade continues to be a strong theme in the market. More and more people are now vaccinated in the US. Among all the age groups, seniors are among the ones with the highest vaccination rates. Based on the latest data, 41 million elderly Americans, or 75% of the age group, have taken at least one dose of the Covid-19 vaccine. Roughly 55% of that age group are now fully vaccinated.

Seniors are a key demographic of the cruising industry. As more of them get vaccinated, demand for cruises will only increase. Analysts at the investment bank UBS (NYSE:UBS) predict that the demand for cruise travel will exceed the available supply. This is not too surprising as after months of being cooped up indoors, people would want to travel again.

The company is set to take advantage of this pent-up demand as it plans to resume some of its operations this summer. Seven subsidiaries of Carnival are sailing from global ports in Europe and the Caribbean. The company is not yet back to pre-pandemic operations as these trips will have enhanced health protocols, adjusted passenger capacity, and limited itineraries. Carnival will be rolling out trips in a phased approach with only 20% of the company’s global fleet set to sail.

Carnival is working as well with US authorities to get the necessary approval to start sailing again. The company hopes to start sailing again starting this summer. The CDC has mentioned mid-July as a possible start date provided cruise lines meet the necessary requirements. According to a company spokesperson, “Carnival hopes to begin operating sailings on three ships from Florida and Texas, including Carnival Vista and Carnival Breeze from Galveston, and Carnival Horizon from Miami.”

Carnival Will Exit the Pandemic a Much Stronger Company

Looking at Carnival’s latest financial results, it can be seen that the company is in a good position to capitalize on the post-pandemic demand. The company currently has sufficient liquidity to get it through this final difficult stretch. In Q1 2021 the company borrowed $5 billion in debt and raised $1 billion through a public equity offering. The company ended the quarter with a cash position of $11.5 billion of cash and short-term investments.

In terms of the spending required to re-start the business, Carnival expects a monthly average cash burn of $550 million for the first half of 2021. This cash burn consists mostly of ongoing ship operating and administrative expenses and restart expenditures. The company also has some leeway with its outstanding debt. For the next twelve months. Carnival has only $1.8 billion in debt maturities. The company’s cash position is large enough to cover both the cash burn and debt maturities until next year.

Hopefully, by that time the world will have returned to some state of normalcy. Furthermore, provided that the company has some traction with re-starting its business, it may be able to re-negotiate lower rates or extended maturities for its loans.

The company has also been spending to replace some of their older ships with newer, more efficient models. This would make Carnival a more operationally efficient company than it was prior to the pandemic. The company disposed of 19 older ships and is expecting 6 new ships by December right on time to capitalize on emergent demand. The fleet would have a 14% larger average berth size per ship with an average age of 12 years in 2022.

Investor Takeaway On CCL Stock

I believe that CCL stock could surprise on the upside. As a necessity for survival, the company has become incredibly lean and cost-efficient during the pandemic. The company’s new more efficient fleet should also improve margins. Combine all these factors with a surge in demand and the company could vastly outperform earnings expectations these next few years. In terms of valuation, the company is currently trading at only 6.4x 2019 earnings. I believe CCL stock is a buy at these levels.

On the date of publication, Joseph Nograles did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.