Carnival Demand Continues to Persist Despite Recent Macroeconomic Uncertainty; Shares Attractive

Carnival’s profitability is trending in the right direction as the appetite for travel persists. The key booking season (Wave) has proved fruitful despite some economic softness, with Carnival noting it had the highest booking volumes for any quarter in its history across both its geographic segments. This resulted in a massive cash haul, with customer deposits reaching $5.7 billion in the first quarter, well above the $4.9 billion balance at the end of November. In our opinion, this indicates the willingness of customers to commit in advance given a pent-up demand for travel, and Carnival confirmed the booking curve has lengthened in recent periods. First-quarter yields (pricing per diem) were just 8.5% below the same period in 2019. This pricing gap is set to close ahead, with flat net yields in the second quarter of 2023 expected, which implies a healthy pricing set up for the back half of 2023. If Carnival can capture 1%-2% net yield improvement over 2019 in 2023, the second half would imply mid-single-digit growth over prepandemic levels.