Carnival Corporation (CCL  ) reported Q1 earnings that came in slightly above expectations, however, shares were higher on positive comments from management on strong bookings for cruises later in the year and 2022.

Carnival's stock has been in the midst of a major rebound, climbing by nearly 300% since its low in March. However, the outlook remains murky as most cruises remain on hold, cruises in operation are running at lower capacity with increased spending on health protocols, and the companies have issued significant amounts of debt and equity.

Inside the Numbers

In Q1, Carnival reported a net loss of $2 billion. Revenue remains significantly impaired due to the coronavirus, but bookings were up 90% compared to last quarter. This is a reflection of pent-up demand amid optimism that cruises will resume later this year with increasing vaccination rates. Interestingly, this is despite no promotions or marketing from Carnival.

The company ended the quarter with $11.5 billion in cash. It's also doing a good job of reducing expenses and preserving cash as indicated by its falling cash burn rate which was $500 million in Q1. Total customer deposits were $2.2 billion with the majority being credits from cruises that were canceled over the past year.

Carnival anticipates that six out of its nine brands could resume limited operations this summer with cruises in the Caribbeans, Italy, the U.K., and Greece. Essentially, since the crisis began, Carnival has been singularly focused on its survival by boosting its cash reserves and reducing its costs. It also was a beneficiary of the appetite in financial markets for risk as it was able to raise money at reasonable terms given its situation.

Carnival's CEO said, "Throughout the pause we have been positioning Carnival Corporation to return to serving guests an operationally stronger company than we were before. With an exciting roster of six new, more efficient ships by December and with lower capacity from the exit of 19 less efficient ships, we expect to capitalize on pent-up demand and achieve significant cost improvement from the greater efficiency of our fleet, along with ongoing streamlining of shoreside operations."

Stock Price Outlook

Currently, investors seem to be primarily focused on the timeline for Carnival to resume operations where in theory it should be able to take advantage of people's pent-up demand to travel. However, there are some good reasons to believe the stock's recovery is closer to the end rather than the beginning.

For one, the company's stock price remains 50% off its pre-coronavirus levels. However, its enterprise value is nearly 20% higher than its pre-coronavirus level due to increasing amounts of debt and equity issuance. This will dilute the company's future profitability. Another factor is that so much of the company's capacity is going to be absorbed by passengers who were given credits when their cruises were canceled.

For these reasons, investors should be mindful that much of the good news is priced into Carnival, while the market seems to be looking past the negative factors.