Despite major U.S. stock indexes like the S&P 500 and Nasdaq Composite reaching new highs in 2025, some companies are still trading significantly below their peak valuations. Among them, Carnival Corporation and Unity Software present interesting case studies of businesses navigating operational challenges while showing signs of a potential recovery.
Key Takeaways
- Despite a strong market in 2025, some stocks like Carnival and Unity Software remain far below their all-time highs.
- Carnival Corporation is experiencing record demand and revenue but is managing significant debt accumulated during the pandemic.
- Unity Software is undergoing a major strategic shift, divesting non-core assets and focusing on its game engine and AI-driven advertising tools.
- Both companies have seen their stock prices increase over the past year but are still down 57% (Carnival) and 77% (Unity) from their peaks, respectively.
Market Reaches New Peaks Amid Investor Caution
The year 2025 has been strong for the broader stock market, even as investors contend with various risk factors. The S&P 500 index has climbed approximately 12%, while the technology-focused Nasdaq Composite has gained around 15% year-to-date. This rally has pushed top indexes to new records.
However, the performance of the overall market does not reflect the situation for every company. A closer look reveals that numerous stocks have not participated equally in the gains. Some, like Carnival and Unity, are still on a path to recovery after significant downturns, offering a different perspective from the market's headline numbers.
Understanding Market Divergence
Market indexes provide a broad overview of performance but can be heavily influenced by a small number of large-cap companies. When these giants perform well, the index rises, potentially masking underlying weakness or recovery stories in other individual stocks.
Carnival Corporation: Navigating Debt While Demand Surges
Carnival Corporation, the world's largest cruise operator, is in a complex financial position. The company is reporting record-breaking demand and growth, yet its stock price remains 57% below its all-time high. This discrepancy is largely due to the substantial debt the company took on to survive the pandemic-era shutdowns.
Record Bookings and Revenue Growth
Operationally, Carnival's business is showing significant strength. In its fiscal second quarter for 2025, which ended May 31, the company exceeded its own guidance for key financial metrics. It reported record revenue and operating income for the period.
Customer deposits, a key indicator of future demand, reached an unprecedented $8.5 billion. Furthermore, the company reported that 93% of its occupancy for the remainder of 2025 is already booked at high ticket prices, demonstrating sustained consumer interest in cruise travel.
Early Achievement: Carnival's management had a strategic plan called SEA Change, which set targets for sustainability and financial performance. The company successfully achieved these goals a year and a half ahead of schedule.
Strategic Investments Drive Future Growth
To maintain this momentum, Carnival is investing heavily in its offerings. It recently launched Celebration Key, an exclusive destination designed to enhance the passenger experience. The company is also expanding and upgrading other private locations.
Looking ahead, a new ship named Carnival Festivale is scheduled for its debut in 2027. This vessel will feature new family-oriented amenities, including a large outdoor zone with a water park. These investments are complemented by enhancements to its customer loyalty program to encourage repeat business.
The Persistent Debt Challenge
The primary concern for many investors remains Carnival's balance sheet. The company ended the second quarter with over $27 billion in debt, a figure substantially higher than its pre-pandemic levels. However, management is actively addressing this issue.
So far this year, Carnival has refinanced $7 billion of its debt and prepaid $350 million of the $1.4 billion due next year. As the company's financial performance improves, its ability to manage and reduce this debt load will be a critical factor for investors. The stock currently trades at less than 14 times forward one-year earnings, a valuation that reflects the ongoing debt concerns.
Unity Software: A Turnaround Centered on Core Strengths
Unity Software, a key player in the video game development industry, is executing a significant turnaround strategy. After a period of poorly received business decisions, the company is refocusing under the leadership of CEO Matthew Bromberg, who took the helm last year. While the stock is up more than 100% over the past year, it is still trading 77% below its peak from November 2021.
Refocusing the Business Model
Unity's core business provides a popular game engine for creating video games and a suite of digital marketing tools. In the past, the company faced setbacks after pursuing growth strategies that did not resonate with its customer base and failed to deliver financial returns.
The new leadership has implemented a major pivot. Unity has been shutting down or selling business units that were not contributing to sales growth and were negatively impacting earnings. This strategic pruning is designed to streamline operations and concentrate resources on its most promising areas.
What is a Game Engine?
A game engine is a software framework that provides developers with the foundational technology to build and run video games. Unity's engine is one of the most widely used in the industry, particularly for mobile and independent games.
Embracing Artificial Intelligence in Advertising
A central part of Unity's new strategy is the launch of an advanced digital marketing platform that heavily incorporates artificial intelligence (AI). This platform is designed to provide more effective tools for developers to monetize their games through advertising.
Early results from this initiative are positive. According to the company's second-quarter report, its advertising network experienced a 15% sequential increase in sales. This growth is directly attributed to the capabilities of the new AI-powered platform.
"The business continues to have a strong position in the game-engine services space and appears to be making some smart moves," notes one market analysis of the company's recent changes.
With its stock still at a heavily discounted level compared to its former high, Unity's progress in its strategic pivot is being closely watched. The early success of its revised digital marketing strategy suggests that the turnaround plan is gaining traction, potentially offering a compelling opportunity for investors who believe in the company's long-term direction.
