CCL

The group of a few cruise stocks suddenly made a tremendous run up in their market values. The bullish momentum quickly intensified into a double-digit percentage growth in previously unwanted shares of Norwegian Cruise Line (NCLH), following an upgrade from Citi analysts to Buy from Neutral and more confident and detailed comments by Stifel wealth management and investment banking company on Carnival Corporation (CCL) prospects. Cruise traffic in September was "among the best on record", as North Americans kept spending more money on experiences and services than on discretionary goods, which led to record booking rates for affordable cruise voyages, City noted. "Norwegian's shift in strategy from quality at all costs to a more balanced yield/cost relationship gives us confidence that the considerable pricing power and the company's increased focus on costs 'can't help but bear fruit'," Citi said in a client's note, when raising its price targets on Norwegian Cruise to $30 from $20, Royal Caribbean to $253 from $204 and Carnival to $28 from $25, which was also more than 20% above its price level at the moment.

Carnival Corporation added 13.33% for the first four trading sessions of the week to cross an 18-month-long technical border at $20 per share. Potentially, this escapade action paves the way for a jump to the area above $27, where the peaks of September 2021 are waiting, if we consider CCL earnings beat with EPS (earnings per share) of $1.27 vs $1.17 in consensus estimates on $7.89 billion sales in the company's public release only two weeks ago. A great step forward, compared to near-zero profits during the previous three quarters on revenue within a 26.7% to 31.5% lower range between $5.4 billion to $5.78 billion. Carnival's actually improving financial performance amid elevated costs was not properly appreciated so far. Moving closer to the specifics of the business, its newest sailing next-generation cruise ship, the Sun Princess, is built in 2024 and ready for new destinations like Celebration Key, which helps to achieve higher occupancy.

Meanwhile, Stifel highlighted even better hopes for Carnival. When investigating its current bookings dynamics for 2025 and early 2026, with "no signs of a slowdown in demand or spending" for sea-based vacations despite more expensive tickets, they see a space for the cruise company's EPS to exceed $2.00 next year. So, the stock still looks currently undervalued to represent a chance for good mid-term investment, especially since its Royal Caribbean (RCL) rival is now soaring more than 40% higher than its pre-coronavirus peaking prices after rising another 5% for the last several days. Carnival and Norwegian Cruise Lines still keep a 60% discount in market value after pricing erosion since 2020.

William Blair, a global boutique with expertise in investment banking, issued an Outperform rating on the Carnival stock. Barclays and Goldman Sachs also raised their price targets for the cruise operators on "solid KPIs" (key performance indicators), while mentioning fuel prices among major risks for the segment. Cruise operators may grow capacity at a healthy 6% annual clip over the next three years, according to Citi. Some view that recent jumps in cruise stocks could be a "catch-up trade", yet City feels that growth in the segment has "more longevity".