Berenberg says discount on Carnival shares versus market is too harsh

On top of the booking environment, the German broker cited the company's better-than-expected first quarter 2018 numbers and additional tailwinds from foreign exchange and fuel, resulting in their decision to mark-up their 2018 EPS estimates for the company by 6%.

The broker also lifted its US dollar-based target price from $70.0 to $71.5, and reiterated its recommendation to 'hold'.

However, Berenberg's Sterling-based target was lowered from 5300p to 5050p as a result of recent pound strength.

"Strong" consumer confidence across Carnival's markets were also expected to underpin on-board spend and the broker's upwardly revised forecasts for the company's yields.

Regarding the company's relative historical valuation, Berenberg explained that the shares tended to trade on a price-to-earnings multiple that was broadly in-line with the one-year forward market multiple.

Over the past 20 years, that had resulted in a through-cycle P/E multiple of 15 times, which at present was a 10% discount versus the S&P 500.

That could be explained by the impact of recent tax changes in the US, given how there were no reductions included for cruise names.

However, given expectations for stronger EPS growth at Carnival, Berenberg said that discount looked harsh.