Citigroup Raises Price Targets On Cruise Operators As High Demand, Limited Capacity Make Room For More Price Hikes

Citigroup raised price targets on cruise operators such as Carnival Corp. (CCL) and Norwegian Cruise Line Holdings (NCLH) on Wednesday, as high demand for sea-based vacations, combined with limited new capacity, positions these companies to gain greater pricing power, which would enable them to raise fares without harming bookings.

Carnival shares were up 1.3% in early trading, and Norwegian Cruise stock traded nearly 2% higher. Citigroup said recent data shows improving trends in May through July.

“Better-than-ever” demand dynamics and "lower-than-historical" supply growth dynamics are setting up a favorable pricing environment for the cruise lines that could last much longer than investors expect, Citigroup analyst James Hardiman said, according to TheFly.

The brokerage raised its price target on Carnival to $37 from $30 and on Norwegian Cruise to $30 from $25. It maintained a ‘Buy’ rating on both companies.

Retail sentiment on Carnival remained unchanged from ‘bearish’ a day ago, with chatter standing at ‘low’ levels. For Norwegian Cruise, sentiment dropped to ‘bullish’ from the ‘extremely bullish’ territory, with message volume being ‘high,’ according to Stocktwits data.

Citigroup also added Carnival to its focus list, replacing Royal Caribbean (RCL), citing valuation.

The brokerage raised its price target on Royal Caribbean to $390 from $318 and Viking Holdings (VIK) to $68 from $57. It maintained a ‘Buy’ rating on both companies.

Royal Caribbean and Viking Holdings shares were up nearly 1% on Wednesday. Retail sentiment on Royal Caribbean was unmoved within the ‘bearish’ territory compared with a day ago, with chatter at ‘low’ levels.

Viking Holdings also saw ‘bearish’ sentiment, unchanged from a day ago, with message volume at ‘normal’ levels, according to Stocktwits data.

Shares of Carnival gained nearly 18% this year while Royal Caribbean stock jumped about 50%. Meanwhile, Norwegian Cruise shares fell over 10% year-to-date.

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