Smooth Sailing for Carnival
We plan to raise our fair value estimate on the narrow-moat company.
Spending on the experience economy continues to benefit narrow-moat
We plan to raise our $60 fair value estimate by about $3 to account for the first-quarter outperformance and see some gains in higher-than-expected pricing ahead as partially offset by higher-than-forecast costs in our prior model. On top of this, we plan to add about another $2 for faster capacity growth, which is expected to rise at a 4.5% compound annual growth rate through 2021, faster than the 2%-3% we had included in our valuation over the next five years. This would indicate shares as undervalued, trading at 16.6 times the midpoint of updated guidance, and at about a 10% discount to our updated fair value estimate.
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