The pandemic certainly lifted many internet-enabled and tech-focused businesses to new heights. But not all companies were so fortunate. In fact, some were devastated. Unsurprisingly, Carnival (CCL -0.24%) was one of them. Its operations were forced to shut down for months, and the company’s revenue took a big hit.

But Carnival’s business has bounced back nicely from the worst days of the health crisis. Consumers have been indulging their previously pent-up desires for travel, and the cruise giant has been a huge beneficiary. So should investors buy, sell, or hold this cruise line stock now?

The case to buy and hold

In its fiscal 2023, Carnival’s revenue soared 77% to $21.6 billion, which was a new record level. And through the first two quarters of this fiscal year, sales were up 20%.

“We closed yet another quarter delivering records, this time across revenues, operating income, customer deposits and booking levels, exceeding our guidance on every measure,” CEO Josh Weinstein said in the Q2 earnings press release.

Customer deposits are at $8.3 billion, a clear indication of consumer interest in cruise travel. Moreover, the company’s operating income was nearly five times higher in Q2 than in the prior-year period.

Another reason that investors might want to buy and hold this stock is because of a key strength Carnival has — the barriers to entry that are present in its industry.

Imagine trying to start a new cruise line. It would require massive amounts of capital, as well as a long lead time to build new ships and get them ready for service. A would-be entry would also have to jump the regulatory hurdles that would need to be addressed, given that cruises happen in international waters. Health and safety are always issues to worry about as well. These hurdles protect Carnival’s competitive standing.

The case for selling Carnival stock

Despite some positive trends for the company, investors will find no shortage of reasons to avoid the stock. Carnival’s financial position is one top factor. It took on a lot of debt to keep its operation afloat when it had essentially no revenue coming in during the pandemic. To be fair, the company is slowly paying down that hefty debt load. But it’s still troubling.

As of May 31 (the end of its fiscal Q2), the business was carrying more than $29 billion in long-term debt. That was 41% more than its current market cap of $21.8 billion. The fact that the $921 million in interest expenses Carnival paid in Q2 equated to 110% of its operating income won’t do much to bolster investors’ peace of mind. And don’t forget, the company is seeing record demand for its travel offerings.

A valid argument can be made that Carnival’s operations are cyclical. Fears that a recession may strike are still prevalent. If consumers meaningfully pull back on their discretionary spending, particularly on travel and leisure activities, the progress Carnival has made could quickly fade, and it could find itself having trouble servicing its large debt load.

One of Carnival’s biggest expense items is fuel. The problem for the company, however, is that changes in the price of this key input are out of its control. Airlines face a similar conundrum when it comes to managing unpredictable fuel costs.

One final reason to sell Carnival shares is their poor track record as a long-term investment. Over the past 10- and 20-year periods, the shares have lost 56% and 64%, respectively. The company is still trying to claw back its pandemic losses and get back to its peak share price, something I’m not confident will happen anytime soon, or ever.

While Carnival’s momentum is impressive and its market has sizable barriers to entry, I find it hard to be optimistic about the outlook for the stock over the long haul.