Jefferies upgraded Carnival (NYSE:CCL) to Buy from Hold, accompanied by an increase in the target price for the stock from $9 to $25 per share. Shares gained more than 3% pre-market today. In a note to investors, the analysts highlighted several factors that influenced the decision.

According to the analysts, the recent leadership change, along with the recovery in supply and demand, has led to a significant shift in the company's value from debt to equity. They believe this shift makes Carnival shares more attractive for broader investment, with the potential for progress over multiple years.

The analysts noted that the new CEO, who has been in the position for 11 months, has implemented structural changes within Carnival, resulting in a flatter and more efficient reporting structure. This has enabled direct reporting relationships for 93% of the company's total brand capacity to the CEO.

The analysts also highlighted favorable fuel costs as a tailwind for the company. Decreasing fuel prices, coupled with increased fuel efficiency due to a fleet upgrade with newer ships, are expected to improve margins and bring them back to pre-pandemic levels. The reduction in fuel consumption is projected to generate approximately $250 million in annual savings in 2023 compared to 2019, with further improvements anticipated by 2026.