
Core Viewpoint - The cruise industry is experiencing a strong post-pandemic recovery, with companies like Carnival and Viking Holdings showing impressive financial performance and growth potential [1][2][4]. Industry Performance - The cruise industry has benefited from a surge in travel demand, often referred to as "revenge" travel, and has shown resilience despite inflation and rising interest rates [2]. - Cruising is considered a more cost-effective travel option compared to hotels, which have become more expensive [2]. Company Performance - Carnival reported a 9.5% revenue growth in the last quarter, with adjusted earnings per share more than tripling [4]. - Viking achieved a revenue growth of 24.9% in its first quarter, driven by a 7.1% increase in net yields and a 14.9% increase in capacity [7]. - As of the second quarter of 2025, Carnival's EBITDA per available lower berth day (ALBD) grew by 52%, and its return on invested capital (ROIC) more than doubled to 12.5% [6]. Debt and Financial Health - Carnival's debt-to-EBITDA ratio is 3.7 times, while Viking's is significantly lower at 2.0 times, indicating a better debt position for Viking [10]. - Viking's management has forecasted strong future performance, with 37% of its capacity already booked for 2026 [8]. Stock Performance and Valuation - Viking's stock has appreciated 150% since its IPO in June, while Carnival's stock has increased nearly 23% this year [13]. - Viking's forward price-to-earnings (P/E) ratio is 24.5, while Carnival's is lower at 15.3, suggesting that Carnival may be undervalued [14]. - Despite Carnival's higher debt load, its forward enterprise value-to-EBITDA (EV-to-EBITDA) ratio is 8.8, which is lower than Viking's [14]. Investment Considerations - Viking may appeal to growth-oriented investors due to its higher growth rate and lower risk profile, while Carnival may attract value investors looking for a lower valuation and potential for rerating as it pays down debt [18].