Commentary from Wall Street investment banks gave cruise line stocks a lift today, and in 1:50 p.m. EDT trading, both Royal Caribbean (NYSE:RCL) and Carnival Corporation (NYSE:CCL) (NYSE:CUK) 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.
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 TheFly.com 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 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.