With US Cruise Ship Suspension Extended, Norwegian, Royal Caribbean Analyst Changes Targets

Following an official extension of the suspension of cruise operations from U.S. ports, Norwegian Cruise Line Holdings Ltd NCLH and Royal Caribbean Cruises Ltd RCL have halted nearly all cruises through September against expectations of an August resumption, according to BofA Securities.

The Cruise Lines Analyst

BofA’s Andrew Didora updated the estimates to reflect a phased-in recovery beginning in October. The analyst also rolled forward the price targets for cruise lines to 2022 estimates.

Didora maintained a Neutral rating on Norwegian Cruise Line Holdings with a price target lifted from $12.50 to $19.
Didora reiterated an Underperform rating on Royal Caribbean Cruises and raised the price target from $23 to $40.

The Cruise Lines Thesis

Capacity for cruise lines is likely to remain at just 20% of fourth-quarter 2019 levels and may recover to only 75% in 2021, Didora said in a Wednesday note. (See his track record here.)

The analyst lowered 2020 earnings estimates:

From a loss of $7.12 per share to a loss of $7.39 per share for Norwegian Cruise Line Holdings.
From a loss of $14.18 per share to a loss of $15.29 per share for Royal Caribbean Cruises.

With the cruise industry not generating any revenue for six months this year, 2021 could be a transition year “as capacity and revenues likely ramp back up slowly throughout the year,” the analyst said.