1. Carnival: Cruising Towards Success
Carnival, widely recognized for its pandemic-induced collapse when cruise ships remained stranded for nearly a year, has made an astonishing recovery since the economic reopening. The company has effectively tapped into pent-up vacation demand, outperforming other consumer discretionary sectors grappling with inflation, rising interest rates, and recession fears. Carnival’s recent quarters have showcased record revenue, bookings, and demand – a clear indication of a revitalized demand side of the business.
However, it’s essential to consider Carnival’s larger picture. The company’s balance sheet now reflects a significant deterioration compared to pre-pandemic times. With an estimated $4.1 billion to $4.2 billion in adjusted EBITDA and $31 billion in debt, Carnival’s adjusted free cash flow of $1.9 billion in the first three quarters of the year is targeted for debt reduction. Furthermore, an anticipated decline in interest rates may facilitate debt refinancing, ultimately bolstering the stock.
In addition to its current momentum, Carnival stands to benefit from trends like the millennial preference for experiential spending and the relative affordability of cruises compared to other vacation options. Assuming solid growth and balance sheet repair, Carnival’s share price should experience significant growth by 2030.
2. Etsy: Harnessing the Power of Online Marketplace
Etsy, the online marketplace specializing in handmade and vintage goods, witnessed a contrasting trajectory to Carnival. While the company’s shares soared during the pandemic, they subsequently plummeted as its gross merchandise sales growth stagnated.
Despite this setback, Etsy boasts a stable and expanding base of sellers and buyers, with platform activity witnessing a 26% increase in active sellers over the past year. Evidently, Etsy provides a tailored outlet for artisans seeking to sell their creations. More recently, a resurgence in user numbers indicates a potential uptick in revenue growth.
Similar to Carnival, Etsy is poised to benefit from declining interest rates, which boost consumer confidence and spending. Furthermore, lower interest rates favor growth stocks, enhancing Etsy’s stock appeal. With an attractive valuation, trading at around 15 times expected adjusted EBITDA and approximately 30 times GAAP earnings, a modest growth rate and expanding margins could propel Etsy towards transforming an initial investment of $1,000 into $5,000 by the year 2030.