Please ensure Javascript is enabled for purposes of website accessibility

Wall Street's Upbeat Cruise Views Are Still a Downer

By Rich Duprey - Apr 23, 2021 at 9:17AM

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

Things are looking good, but not that good.

Wall Street is warming up to cruise ship stocks in a big way, with Carnival (CCL 6.35%) (CUK 4.30%), Norwegian Cruise Line Holdings (NCLH 9.97%), and Royal Caribbean (RCL 2.86%) 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.

 

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

Norwegian Cruise Line Holdings Ltd. Stock Quote
Norwegian Cruise Line Holdings Ltd.
NCLH
$12.46 (9.97%) $1.13
Carnival Corporation Stock Quote
Carnival Corporation
CCL
$9.38 (6.35%) $0.56
Royal Caribbean Cruises Ltd. Stock Quote
Royal Caribbean Cruises Ltd.
RCL
$36.30 (2.86%) $1.01
Carnival Corporation Stock Quote
Carnival Corporation
CUK
$8.49 (4.30%) $0.35

*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
316%
 
S&P 500 Returns
112%

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.