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Royal Caribbean stock has fallen since its July peak but remains 94% up in 2023.
Daniel Slim/AFP via Getty Images
After two months of declines for cruise line stocks, it may be time for investors to get back on board.
That’s the view of Truist analysts, who upgraded their outlook on the sector to positive, and also upgraded
Royal Caribbean Group
(ticker: RCL) to Buy from Hold, and
Carnival Corp.
(CCL) to Hold from Sell in a note Tuesday.
Cruise stocks enjoyed a stellar first half of 2023 amid surging international travel demand as the sector’s post-Covid recovery finally started to ramp up. Carnival stock soared 134% in the first six months of the year, Royal Caribbean climbed 110%, and
Norwegian Cruise Line Holdings
(NCLH) gained 78%.
Truist analysts said they downgraded the sector to Neutral in July after the stocks became “just too hot for our liking.” But since peaking in July, Royal Caribbean is down 15%, Carnival has fallen 23%, and Norwegian is down 25%.
Those recent losses are enough for the analysts to suggest getting back into the sector, particularly as they see “exceptionally strong” bookings and pricing trends for 2024 and 2025.
“It didn’t take us long to get back on the bull train. Strong forward trends and cooled off stocks make us again Positive on the sector,” they said. The analysts, led by Patrick Scholes, view consensus earnings estimates for 2024 and 2025 as being “too conservative,” though they said it may be December before the companies offer guidance for next year.
For Royal Caribbean, they increased their price target to $137 from $115, implying 43% upside to Monday’s closing price. Despite the new Hold rating, they still see Carnival as a relative underperformer but said the Sell rating was hard to defend as they think “rising tides will lift all boats.” They maintained a Hold rating on Norwegian Cruise Line stock.
Redburn Atlantic analysts Alex Brignall upgraded both Carnival and Norwegian to Buy from Neutral last week, noting that the cruise operators have made progress in repaying debt and improving profitability.
He added that their almost exclusively international workforces limit the impact of wage inflation in the U.S.
Royal Caribbean rose 2.1% ahead of the open Tuesday, Carnival shares were 1.9% up, and Norwegian stock pointed 1.1% higher.
Write to Callum Keown at callum.keown@barrons.com
