Citi has expressed optimism about Norwegian Cruise Line (NCLH, Financial) and Royal Caribbean (RCL), resulting in pre-market gains for both companies. Norwegian Cruise Line surged nearly 4% and Royal Caribbean rose over 2% in pre-market trading. Other cruise stocks, including Carnival Cruise Line (CCL) and Viking Holdings (VIK), also experienced pre-market increases.
Citi upgraded Norwegian Cruise Line from a "neutral" to a "buy" rating, highlighting its potential for substantial earnings growth and multiple expansion. Analyst James Hardiman noted that Norwegian's strategic shift suggests that significant pricing opportunities will not be offset by rising costs. He estimates a 23% compound annual growth rate in earnings per share over the next three years. If Norwegian can maintain a 2.5% earnings/cost ratio target, the growth rate could reach 30%.
Citi also added Royal Caribbean to its positive catalyst watchlist, anticipating that the company's upcoming financial results will include updates on its long-term strategy. While Norwegian Cruise Line has only increased by 4% this year, Royal Caribbean has seen an impressive rise of nearly 42%.
