Most investors left no dry powder, Wall Street lingo for buying power, in their accounts after chasing the technology sector in its pursuit of higher prices. Other sectors, such as the consumer discretionary space, aren’t as attractive in their growth projections and sophisticated proposals to deliver value to investors, but that changes today.

Shares of Carnival Co. (NYSE: CCL) are now trading nearly 5% higher on the open. That’s after the company reported its second quarter 2024 results, which gave buyers every reason to come running to the stock and support it higher. Despite this recent rally, Wall Street analysts still forecast another double-digit run higher. This thesis is backed by all of the fundamental factors surrounding Carnival.

Some of these include the potential of the Federal Reserve cutting interest rates later this year, but before investors dig inside the outside factors helping Carnival stock rally, here’s how the company stands against peers like Royal Caribbean Cruises (NYSE: RCL) and Norwegian Cruise Line Holdings (NYSE: NCLH).

Carnival Stock Leads the Cruise Industry as Wall Street's Top Choice

Wall Street analysts have given Carnival a thumbs up on the company’s latest results. The market seems to agree with these views, considering how they bid on the stock’s price on this recent rally.

According to analysts, Carnival stock’s earnings per share (EPS) could grow by as much as 39.6% in the next 12 months, compared to projections of only 15.2% for Royal Caribbean stock and a competitive—but not as good—projection of 24.8% for Norwegian stock.

Just a month ago, in May 2024, analysts at Wells Fargo saw it fit to boost Carnival’s stock price target up to $23 a share from their previous $22 valuation. This new range means that Carnival stock needs to rally by 32.9% to prove these projections right.

Instead, Royal Caribbean stock sees only a 1.2% upside through its consensus $156.3 share price target today. Norwegian stock sees a 25.1% upside in its consensus $21.8 share price target. While Norwegian stock seems awfully close to Carnival, they have one significant difference.

As of 2023, Norwegian only held 8.6% of the market, while Carnival took over 55% of the industry. Considering that Carnival holds a significantly larger share of the market, investors can lean on Carnival rather than Norwegian to deliver upside in the coming months, and the most recent quarter proves this right.

Carnival Stock Primed for Rally Following Strong Results

After posting a net loss of $407 million a year ago, Carnival pushed out a net profit of $92 million in the most recent quarter. This massive turnaround justifies the rally investors are seeing today.

More than that, operating cash flows nearly doubled over the year, giving investors a free cash flow (operating cash flow minus capital expenditures) of $1.3 billion compared to $625 million a year prior.

As the company also posted record operating income for the second quarter, management had another piece of evidence to boost their 2024 guidance. Total customer deposits reached a record high of $8.3 billion, compared to the previous record of $1.1 billion.

This made analysts’ – and management’s – job easier to project the company’s financials moving forward, but here’s a snippet. “We are very pleased with the continued acceleration of demand for 2025 and beyond…” is the sentiment leading the increased guidance to end the year for Carnival stock.

While some investors may be wary of a press release that sounds too optimistic, there is a genuine reason consumers are feeling comfortable – and confident – spending more on travel and leisure in the coming quarters.

The Technical Factors Propelling Carnival Stock Upwards

According to the CME’s FedWatch tool, the Fed is looking to cut interest rates by September of this year. This means cheaper – and more flexible – financing for consumers, likely boosting demand for consumer discretionary stocks like Carnival.

Understanding the validity of these trends, those at Price T Rowe Associates boosted their stake in Carnival stock by 1.5% over the past quarter, bringing the asset manager’s net investment up to $22.3 million in dollar terms. Considering Carnival stock’s $21.6 billion market capitalization, this position represents roughly 1% ownership in the company, not insignificant.

Last but not least, 9.8% of Carnival stock’s outstanding shares are held in short positions, which is close to placing the stock at risk of another run higher, as short sellers will realize this is a winning stock and be forced to close their positions (which involves repurchasing the stock, increasing upward pressure).