Please ensure Javascript is enabled for purposes of website accessibility

Why Cruise Line Stocks Just Popped Again

By Rich Smith - Apr 21, 2021 at 2:17PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

One analyst likes these stocks a little more, and another hates them a little less.

What happened

Commentary from Wall Street investment banks gave cruise line stocks a lift today, and in 1:50 p.m. EDT trading, both Royal Caribbean (RCL 1.09%) and Carnival Corporation (CCL 1.97%) (CUK 3.04%) are moving higher, rising 3.3% and 4.8%, respectively.

Goldman Sachs was first to support the cruise line stocks, raising its Carnival price target to $26 a share and valuing Royal Caribbean at $95 a share. Berenberg's endorsement was less enthusiastic as it raised its Carnival price target only to $20 and assigned a $70 price target to Royal Caribbean.

Three small cruise ships circling within a bay.

Image source: Getty Images.

So what

More interesting than the numbers themselves, however, was the fact that neither analyst changed its overall opinion of these stocks. Goldman still thinks Carnival and Royal Caribbean should be held but not bought. Berenberg still thinks that you should sell them both.

As Goldman opined, and reports, estimates for when cruise lines might resume cruising continue to be pushed back (hence, it's declining to recommend buying just yet). But at the same time, there are "stronger signs of pent-up leisure demand" that could boost the cruise business once sailing does return. In the analyst's estimation, that translates into lower earnings estimates this year and next but perhaps better results by the time 2023 rolls around.

Similarly, Berenberg says it's raising its price targets in response to "current optimism surrounding recovery plays."

Now what

Now here's the bad news: Investors' "optimism" notwithstanding, Berenberg warns that there's still "significant uncertainty" as to when cruising will resume. And the fact that investors have already bid these stocks up so much in anticipation of that resumption means the "risk/reward" equation from here on out looks "challenging."

To me, that sounds like analyst-speak for saying that with Royal Caribbean stock up 18% year to date and Carnival shares up 32%, most of the gains in these stocks may have already been made -- and it's time to cash out.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Carnival Corporation Stock Quote
Carnival Corporation
$8.82 (1.97%) $0.17
Royal Caribbean Cruises Ltd. Stock Quote
Royal Caribbean Cruises Ltd.
$35.29 (1.09%) $0.38
Carnival Corporation Stock Quote
Carnival Corporation
$8.14 (3.04%) $0.24

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.