Hurricane Milton struck Florida’s central west coast as a dangerous Category 3 storm on Oct. 9.
As Floridians braced for the hurricane’s landfall, airlines canceled hundreds of flights and cruise lines shifted routes.
At least 16 cruise ships are directly affected, and some cruises advised that they did not expect to be able to return to port until Oct. 12, Florida’s Maritime Executive newspaper reported.
The Florida cruise industry is just entering its busy season, which generally aligns with winter as travelers from colder regions, especially the northern U.S. and Canada, flock south to warmer weather and the Caribbean.
Despite the disruptions, analysts remain optimistic about the cruise industry’s resilience, lifting stock price targets for the major cruise lines.
Cruise lines were particularly vulnerable when operations were halted during the Covid-19 pandemic. Now, analysts are seeing growth driven by strong demand from U.S. customers, who continue to travel despite economic uncertainties.
Citi analyst is optimistic that the cruise-sector rally will extend into 2025 and beyond.
Image source: Dan Kline/Come Cruise With Me
Citi analyst raises Carnival stock price target after earnings
Citigroup on Oct. 9 updated share-price targets on Carnival (CCL) , Royal Caribbean and Norwegian Cruise Line Holdings.
The analyst is optimistic that the cruise-sector rally will extend into 2025 and beyond, thefly.com reported. All three stocks are up more than 20% in the past month.
Carnival, Royal Caribbean, and Norwegian Cruise Line are the biggest market players in the cruise line industry.
According to Cruise Market Watch, in 2024 Carnival and its sub-brands accounted for 37.3% of the industry’s revenue, with Royal Caribbean Group at 23.9% and Norwegian at 14.1%.
Citi raised its price target on Carnival to $28 from $25 and affirmed a buy rating on the shares.
Related: Analysts retool Carnival stock price targets ahead of earnings
The analyst said Carnival has strong potential for revenue growth, citing recent positive trends in the company’s performance and the anticipated benefits from assets like Celebration Key, the line’s new private island destination in the Bahamas. Celebration Key is set to open in July.
On Sept. 30, Carnival reported that for the fiscal third quarter ended Aug. 31, net income surged 60% from a year earlier to $1.7 billion as revenue increased 14% to $7.9 billion.
Citi also says Carnival could sacrifice sales growth and focus on reducing debt and interest payments. Although Carnival has posted impressive financial results, it remains burdened by substantial debt, the investment firm said.
Carnival’s debt reached its peak at $35.14 billion in Q1 2023. As of Aug. 31, it still has nearly $29 billion in total debt. But if interest rates ease, Carnival could benefit from reduced debt repayments, particularly when it refinances or issues new debt, Citi said.
On Oct. 9 Carnival shares closed 7.1% higher at $20.20.
Analyst upgrades Norwegian, lifts Royal Caribbean price target
Citi raised its stock price target on Royal Caribbean (RCL) to $253 from $204 with a buy rating. The stock closed at $193.03 on Oct. 9, so the new target indicates 31% potential upside.
The analyst has added a “90-day positive catalyst watch” on Royal Caribbean shares and expects the company to unveil a new long-term plan in the next two quarters, likely with its Q3 or Q4 earnings report.
Related: Analysts sail into new stock price targets for Royal Caribbean, Norwegian
Citi says Royal Caribbean’s earnings have the potential to reach $20 per share.
For 2023, the company reported earnings of $6.31 a share. And in Q2, it increased its fiscal 2024 earnings-per-share guidance to between $11.35 and $11.45 from a range of $10.70 to $10.90.
“While this would be a bold target at first blush, we do not believe that the building blocks are overly optimistic,” the analyst said.
Royal Caribbean is set to report Q3 earnings on Tuesday, Oct. 29. Analysts project earnings of $5.05 per share, a 31% increase from a year earlier.
The company has exceeded Wall Street’s adjusted-earnings expectations for the past four quarters. In Q2 its adjusted EPS rose 76% year-over-year to $3.21.
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Citi also upgraded Norwegian Cruise Line Holdings (NCLH) to buy from neutral with a price target of $30, up from $20.
Citi projects 23% annual earnings growth over three years for Norwegian. The figure, it said, could reach 30% if the company maintains a 2.5% yield/cost spread. Both scenarios point to strong earnings growth and expanded multiples.
Norwegian closed at $23.07 per share, up 11%, on Oct. 9.
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