According to Citigroup, after an extended layover, investors in cruise ship stocks may miss anchor time. The cruise industry has suffered a setback as countries closed their borders and travelers stayed home during Covid-19 lockdowns. But the tides have turned with borders reopening, a pent-up surge in demand and a discount in testing requirements, meaning 2023 could mark a “flagship 12 months” for the industry, the Wall Street firm said. The context is improving a lot that analyst James Hardiman said in a note to clients on Monday that “cruise stocks as a bunch have moved from ‘intermediate deals’ to forcing long-term investment narratives.” “Contrary to most of our coverage, the post-pandemic momentum within the cruise space clearly outweighs the potential macroeconomic headwinds in 2023, with emerging Asian and European narratives unfolding in 2024.” Hardiman said. Hardiman’s reasoning concerning the shift in sentiment comes from conversations with travel agents and web traffic trends that indicate high demand. Some data points also suggest that 2023 cruises are likely to exchange 2019 levels. Hardiman called Royal Caribbean his top pick, but Norwegian and Carnival also offer decent growth. Royal Caribbean is preferred for its solid track record of keeping costs down and offering one of the best risk return opportunities throughout the group. “RCL stays our favourite brand within the group, considering probably the most compelling balance between pricing and price control, while carrying the least dilution of earnings (debt and equity) as a result of the fleet breakdown pandemic,” Hardiman wrote. So far this 12 months, Royal Caribbean shares are off to a solid start, up greater than 41% after falling around 36% in 2022. Citi has re-set its RCL share price goal at $80, up 19% from Wednesday’s closing. Citi rates the shares as a high-risk purchase. Hardiman maintained a neutral but high risk rating for Carnival, raising its price goal to $13 from $9 per share. This represents a rise of around 15% since Wednesday’s close. It maintained the identical rating and price goal of $18 on Norwegian. “Norwegian serves highly regarded premium brands within the cruise area, so we now have little question this client will bounce back nicely once travel restrictions are eased and virus concerns subside,” he wrote. – Michael Bloom of CNBC provided the reports
Cruise stocks can see ‘banner 12 months.’ Citi says it is a long-term trade
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