Carnival's Loyalty Overhaul and Strategic Edge Position It for a Strong 2026 and Beyond

Carnival Corporation & plc (CCL) is poised to redefine its customer engagement strategy with the 2026 launch of its "Carnival Rewards" loyalty program, a spend-based overhaul of its existing VIFP system. This shift, coupled with robust financial discipline and a compelling valuation, positions CCL as a compelling investment opportunity—especially when contrasted against Royal Caribbean (RCL). Here's why investors should take notice.

The Carnival Rewards Overhaul: A Strategic Masterstroke

The Carnival Rewards program, set to debut in June 2026, replaces the legacy VIFP system, which rewarded customers based on sailing nights. Instead, it introduces a dual-earning structure:
- Points are earned based on cruise fares and onboard spending, redeemable for activities, spa treatments, and future cruises.
- Stars determine tier status (Red, Gold, Platinum, Diamond), tied to total spend over two years—a stark contrast to VIFP's lifetime status for top-tier members.

This spend-driven model aligns CCL with industry leaders like airlines and hotels, incentivizing higher onboard revenue. Current Diamond members retain their status until 2032, ensuring loyalty retention. Crucially, the program integrates a co-branded credit card (Carnival Rewards Mastercard), accelerating points and star accumulation—a move that could boost recurring revenue streams.

Christine Duffy, Carnival's president, emphasized the program's goal of “meaningful recognition” for high-spend customers. Analysts agree: the overhaul could drive $1.2B in incremental EBITDA by 2028, as Carnival capitalizes on rising onboard spending trends.

Financial Discipline: Why CCL Outshines RCL in Valuation

CCL's financial turnaround has been nothing short of remarkable. While both CCL and RCL face post-pandemic recovery challenges, CCL's valuation metrics are significantly more attractive:

• P/E Ratio: CCL trades at a forward P/E of 11.8X, far below RCL's 16.26X and the industry average of 17.70X. This reflects CCL's undervalued stock despite record Q2 2025 EBITDA growth (+38% YoY) and margins surpassing 2019 levels.
• Debt Management: CCL reduced its net debt-to-EBITDA ratio to 3.7X in early 2025 from 4.1X, signaling stronger balance sheet health. RCL's ratio, while not explicitly disclosed for Q2, faces near-term cost pressures from port investments and dry dock schedules.
• Zacks Rank: Both companies hold a #3 (Hold) rating, but CCL's +31.7% EPS growth estimate for 2025 and $6.7B EBITDA guidance suggest it's undervalued relative to its fundamentals.

Growth Catalysts: Beyond the Loyalty Program

CCL's strategy extends beyond customer engagement:
1. Destination Investments: The launch of Celebration Key in the Bahamas and upgrades to its private islands (Half Moon Cay, Isla Tropicale) aim to boost ancillary revenue.
2. Fleet Modernization: The AIDA Evolution program introduces eco-friendly ships with premium amenities, attracting sustainability-conscious travelers.
3. Operational Efficiency: Cost controls in 2025 Q1 cut adjusted cruise costs per available lower berth day (-1.9% YoY) while maintaining margins.

In contrast, RCL's growth is hampered by near-term cost headwinds, including a 280-basis-point margin drag in Q3 2025 from port acquisitions and dry dock expenses.

Investment Thesis: Buy CCL Before the Market Catches Up

CCL's combination of low valuation, margin resilience, and structural growth drivers makes it a compelling buy. Key takeaways:
- Undervalued Stock: At an EV/EBITDA of 8.6X, CCL trades at a 45% discount to peers, despite outpacing RCL in EBITDA growth (+38% vs. RCL's +360bps margin improvement).
- Near-Term Catalysts: Over 80% of 2025 bookings are already secured at higher prices, ensuring revenue visibility.
- Long-Term Leverage: The Carnival Rewards program and credit card integration could drive sustained loyalty and repeat bookings.

Action Item: Investors should accumulate CCL shares ahead of the loyalty program launch. A target price of $50–$60 (up from $39.50 as of June 19) aligns with its valuation upside and EBITDA recovery trajectory.

Risks to Consider

• Debt Levels: CCL's $27.3B debt remains a concern, though refinancing efforts have reduced interest costs.
• Demand Volatility: A slowdown in discretionary spending could pressure cruise bookings.

Conclusion

Carnival's Carnival Rewards program and financial discipline mark a turning point for the company. With a strong balance sheet, undervalued stock, and growth drivers aligned for 2026 and beyond, CCL is a conviction buy for investors seeking exposure to the cruise industry's recovery. Don't wait for the market to recognize this—it's already priced in the upside.

Rating: Buy
Price Target: $55–$60 (12–18% upside from current levels)