US cruise stocks rise, Citi bullish on strong growth indicators

(Reuters) – Shares of U.S. cruise operators including Norwegian Cruise Line Holdings rose in midday trade on Wednesday as brokerage Citi grew bullish on the companies’ long-term outlook.

Shares of Norwegian Cruise rose as much as 11% after Citi switched 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 nearly 9%.

Cruise operators have posted strong results this year, riding on solid appetite for sea vacations and higher ticket prices. Americans have taken advantage of experiences and services over discretionary goods, resulting in record booking rates for affordable cruise travel.

Cruise traffic in September was among the best on record, while pricing data remains consistently positive as we look to 2025 and beyond, Citi said, based on web traffic analysis.

“Norwegian’s shift in strategy from quality at any cost to a more balanced yield/cost relationship gives us confidence that the company’s considerable pricing power and increased focus on costs ‘can’t help but pay off,'” said Citi analyst James Hardiman .

The brokerage raised price targets for Norwegian Cruise to $30 from $20, Royal Caribbean to $253 from $204 and Carnival by $3 to $28.

Both Royal Caribbean and Norwegian Cruise expect to grow capacity at a healthy 6 percent annually over the next three years, Citi said, adding that it will be the biggest contributor to their revenue growth.

So far this year, Royal Caribbean, Norwegian Cruise and Carnival stocks are up 50%, 14% and 9%, respectively, including session moves.

Norwegian Cruise’s forward price-to-earnings ratio for the next 12 months, a common benchmark for 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)