Norwegian Cruise Line (NCLH) experienced an impressive six months, fueled by the surge in travel demand. However, Truist Securities has a different outlook.
On Tuesday, analysts C. Patrick Scholes and Gregory Miller decided to downgrade Norwegian Cruise shares from Buy to Hold.
It has been smooth sailing for cruise stocks overall this year. Royal Caribbean Group (RCL) has seen a 103% increase, Carnival (CCL) has climbed nearly 129%, and Norwegian Cruise has seen a rise of 79%. The Defiance Hotel, Airline, & Cruise ETF (CRUZ) has also flourished, with a 36% rise compared to the S&P 500’s gain of 18.5%.
These names have been propelled by positive updates from operators regarding the surge in demand from travelers.
Truist analysts acknowledge the undeniable recovery in demand following the Covid-19 lockdowns. However, they believe that the stock has already priced in most of the gains.
“Given the massive outperformance YTD and especially over the past two months, at this juncture, we see cruise equities far closer to a theoretical ‘fair value,'” commented Scholes and Miller in a note.
Norwegian Cruise stock has experienced nearly a 50% increase in value over the past two months.
In light of their analysis, Scholes and Miller raised their price target on shares to $23 from $17, indicating a potential 9% gain from its current level. As of late morning trading, the stock stood at $20.95, reflecting a modest 0.9% increase.
Their optimistic stance stems from the expectation that Norwegian Cruise and its counterparts will likely express a positive outlook on future travel trends during this earnings season. These positive sentiments could lead analysts to revise their 2023 earnings projections, consequently resulting in higher price targets.
Norwegian Cruise is scheduled to report its second-quarter earnings on Aug. 4. The company has not yet responded to requests for current booking trends. However, during a previous earnings call in May, CEO Harry Sommer expressed confidence in strong demand and pricing not just for this year, but also for the future.
