By Granth Vanaik

Carnival is expected to post robust second-quarter revenue growth as new and younger customers, undeterred by high inflation, spend on novel experiences such as cruising.

While Americans have cut back on purchasing big-ticket non-essential goods due to soaring costs, protracted confinement to their homes during the pandemic has whet their appetite for outdoor experiences.

According to data from J.P. Morgan, there has been an 80-basis-point rise in consumer spending on services including cruises and flight travel from a year earlier, while expenditure on goods such as apparel and footwear has declined by 230 basis points.

Millennials (born between 1981 and 1996) and GenX (born between 1965 and 1981) have reached peak earnings years and are feeding multi-generational travel as they spend on cruises and bring their families along, according to J.P. Morgan analysts, who lifted rating on Carnival stock to "overweight" last week.

THE CONTEXT

J.P. Morgan and Bank of America analysts upgraded Carnival's stock last week, highlighting that bookings across the cruise industry have reached historical levels and there has not been any notable upsurge in cancellation rates.

A younger customer base is helping fuel this demand, with 88% of millennial and 86% of GenX travelers that have past cruising experience intending to sail again, according to a report from Cruise Lines International Association.

"Given (cruise) is a vastly under-penetrated travel product ... more marketing instead of price cuts drives growth in new-to-cruise, which has a reasonably high conversion rate to repeat-cruisers," Barclays analyst Brandt Montour said.

THE FUNDAMENTALS

** Carnival's Q2 revenue is expected to rise 98.5% to $4.77 billion, according to analysts polled by Refinitiv

** Q2 loss per share is expected to be 34 cents

** The cruise operator will report Q2 earnings on June 26 before market opens

WALL STREET SENTIMENT

** Carnival shares had risen about 64% in the past 12 months as of last close

** The current average rating of 22 analysts on Carnival stock is "buy", with 12 rating it "buy" or higher - Refinitiv

** The median price target is $12, with at least nine brokerages raising their price targets on the stock since April

(Reporting by Granth Vanaik in Bengaluru; Editing by Vinay Dwivedi)