(Reuters) – Shares of U.S. cruise lines including Norwegian Cruise Line Holdings rose in afternoon trading on Wednesday after brokerage Citi turned bullish on the companies’ long-term prospects.
Shares of Norwegian Cruise rose as much as 11% after Citi upgraded to ‘buy’ from ‘neutral’, while shares of Royal Caribbean Group hit an all-time high of $263 after rising as much as 5%. Carnival Corp rose almost 9%.
Cruise operators have posted strong results this year, thanks to strong demand for sea holidays and higher ticket prices. Americans have forfeited experiences and services in lieu of luxury goods, resulting in record booking rates for affordable cruise travel.
September cruise traffic was among the best ever, while pricing data remains consistently positive as we look to 2025 and beyond, Citi said, based on web traffic analysis.
“Norway’s strategy shift from quality at all costs to a more balanced revenue/cost ratio gives us confidence that the company’s significant pricing power and increased focus on costs ‘cannot help but pay off,’” said Citi analyst James Hardiman.
The brokerage raised price targets for Norwegian Cruise from $20 to $30, Royal Caribbean from $204 to $253 and Carnival by $3 to $28.
Both Royal Caribbean and Norwegian Cruise are expected to grow capacity by a healthy 6% per year over the next three years, Citi said, adding that this would be the biggest contributor to their revenue growth.
So far this year, shares of Royal Caribbean, Norwegian Cruise and Carnival are up 50%, 14% and 9% respectively, including session moves.
Norwegian Cruise’s forward-12-month price-to-earnings ratio, a common measure of stock valuation, was 11.05, compared with 13.99 for Royal Caribbean and 11.31 for Carnival.
(Reporting by Savyata Mishra and Neil J Kanatt in Bengaluru; Editing by Alan Barona)
