Wall Street's Upbeat Cruise Views Are Still a Downer

Wall Street is warming up to cruise ship stocks in a big way, with Carnival (NYSE: CCL)(NYSE: CUK), Norwegian Cruise Line Holdings (NYSE: NCLH), and Royal Caribbean (NYSE: RCL) all getting big price target upgrades, but the outlook could still leave investors feeling cold.

Although analysts are becoming increasingly bullish about consumers returning to cruising again, the price targets they've set for the stocks are all well below where their shares currently trade.

Cruise ship sailing towards storm cloud

Image source: Getty Images.

Morgan Stanley analyst Jamie Rollo hiked his price target on Carnival stock by 29%, raising it from $14 to $18 per share, but with the biggest cruise operator closing yesterday at just under $27 a share, it means he thinks the stock is overpriced by 33%.

He also raised his price target on Royal Caribbean to $61 per share, a 22% increase, but like the other cruise ship operators, with Royal's stock just over $84 a share, there's a lot of air beneath where he thinks it ought to be.

Similarly, Berenberg analyst Stuart Gordon raised his price target on Norwegian Cruise Line 14% to $25, but that's still 14% below the $29 a share the smallest cruise operator trades at.

Rollo rates Carnival and Royal as underweight because demand is not as high relative to supply, the cruise operators have taken on significant debt, and the market has already baked in recovery multiples "well above" their pre-pandemic levels.

Gordon is just as cheery, saying investors bid up the stocks as "recovery plays," but the environment "remains challenging in terms of assessing the risk/reward balance for investors."

The industry's future is looking better, but uncertainty about when these companies will really resume operations means their investment potential is not as good as the market thinks.

10 stocks we like better than Norwegian Cruise Line Holdings
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Norwegian Cruise Line Holdings wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of February 24, 2021

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool recommends Carnival. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


More Related Articles

Info icon

This data feed is not available at this time.

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.