Cruise Demand Continues to Trend Favorably for No-Moat Carnival; Shares Undervalued

For no-moat Carnival, demand signals remain positive, as indicated by customer deposits of $5.1 billion (up from $4.8 billion last quarter) and cumulative advanced booking volumes that are above historical averages at higher prices (constant currency) relative to 2019. Spending patterns continue to imply consumers are willing to allocate disposable personal income to services over goods, with average services spend rising nearly 4% over the last five months, while goods spend has declined roughly 1%. This behavior positions Carnival well ahead of wave season, where significant bookings will be undertaken to attempt a return to positive EPS in 2023. We don’t plan any material change to our $22 (GBX 1,970) fair value estimate as we nudge our 2023 expenses closer to Carnival’s net cruise cost ex-fuel guidance of 5%-6% (our preprint estimate was 7.6%) and view shares as attractive.