Cruise ship operator Carnival (NYSE:CCL) announced that in March of next year, it will sunset its P&O Cruises Australia brand. Subsequently, this unit will be folded into the flagship Carnival Cruise Line. The move should expand capacity for the mainline unit, bolstering sentiment for CCL stock. In addition, shares popped on the positive implications of the current consumer economy.
According to industry publication Cruise Industry News, the change represents “the latest in a series of what Carnival said were strategic moves designed to increase guest capacity for Carnival Cruise Line, the company’s flagship brand and the highest-returning brand in Carnival Corporation’s global portfolio.”
Following the directive’s execution, Carnival Cruise Line will have added eight new ships to its fleet since 2021. This tally includes the transfer of three vessels from sister brand Costa Cruises. Carnival CEO Josh Weinstein explained the rationale for the decision as follows:
Despite increasing Carnival Cruise Line’s capacity by almost 25% since 2019 including transferring three ships from Costa Cruises, guest demand remains incredibly strong so we’re leveraging our scale in an even more meaningful way by absorbing an entire brand into the world’s most popular cruise line.
CCL stock is down about 2.8% on a year-to-date basis. However, it’s up more than 15% in the trailing month.
CCL Stock Points to Robust Consumer Demand
Thanks to the brand combination, management anticipates that the cruise ship operator’s mainline unit will see conspicuous expansion. Weinstein stated the following:
In 2019, Carnival Cruise Line was 29% of our total capacity, and when we complete this move early next year, Carnival Cruise Line – our highest-returning brand – will make up approximately 35% of our total global capacity. While our company’s overall growth between 2019 – 2028 is projected to be less than 2% (CAGR), the majority will be for Carnival Cruise Line, which will grow by approximately 50% over that time period.
For investors seeking positive news about the underlying economy, CCL stock offers a compelling narrative. While Americans are struggling with inflation and elevated borrowing costs, the travel sector is enjoying sustained positive momentum.
While the acute sentiments tied to the “revenge travel” phenomenon have faded, this dynamic gave way to travel prioritization. Many consumers continue to put money into experiential expenditures, which bodes well for CCL stock.
Relative to traditional hotels, cruises are generally more affordable. This bang for the buck has apparently convinced many analysts, who rate CCL stock a consensus strong buy. Additionally, their average price target of $22 implies over 30% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
