Norwegian Cruise Line Stock Gets Upgrade, 'Pent-up Leisure Demand' Among Reasons

Norwegian Cruise Line Holdings Ltd NCLH is poised for an inflection in fundamentals once cruises resume, given the “stronger signs of pent-up leisure demand," according to Goldman Sachs, also noting an improvement in capital markets creating opportunities for accretive refinancing and debt payoffs.

The Norwegian Cruise Line Analyst: Stephen Grambling upgraded the rating for Norwegian Cruise Line from Neutral to Buy, while raising the price target from $27 to $37.

The Norwegian Cruise Line Thesis: Pent-up leisure demand is driving “a recovery in net yields beyond pre-pandemic levels,” while net cruise costs may bounce back more gradually, Grambling said in the upgrade note.

“Additionally, EPS will be further buoyed by debt refinancing toward historical norms as fundamentals improve and capital markets remain accommodative,” he noted.

While other cruise line companies may benefit from improving fundamentals, there is greater upside for Norwegian Cruise Line, given to its “higher-end customer base, greater ability to host vaccine-only sailings before lower cases could allow for a full recovery in cruising, longer cash burn run-way, lower leverage on recovered EBITDA, and higher capacity growth,” the analyst wrote.

NCLH Price Action: Shares of Norwegian Cruise Line Holdings had risen by 6.93% to $28.62 at the time of publication Wednesday.

(Photo: Norweigan Cruise Lines)