Strong Demand Makes 2018 An Encouraging Year For Norwegian Cruise Line, Analyst Says

Norwegian Cruise Line Holdings Ltd. NCLH has been upgraded by an analyst on encouraging cruise booking levels and strong pricing demand for 2018.

The Analyst

C. Patrick Scholes of SunTrust Robinson Humphrey upgraded Norwegian Cruise Line Holdings from a Hold to a Buy and raised the price target from $62 to $68.

The Thesis

After conducting pricing and demand channel checks, Scholes upgraded Norwegian Cruise Line on a bright 2018 price and demand outlook. 

Norwegian’s advertised pricing for sailings one to 18 months out was up 6.8 percent year-over-year, up from last month's 4.4-percent year-over-year figure, according to SunTrust. 

Cruise bookings for the industry in 2018 show low double-digit growth year-over-year, far outpacing the industry's year-over-year capacity increases, Scholes said. Norwegian’s cruise booking growth is expected to grow along with the industry, he said. 

This year is expected to be a strong one for the cruise industry, Matthew Eichhorst, president of Expedia 

"Ninety-four ships will be added over the next eight years, and bookings are up heading into wave season. We are bullish about the year,” Matthew Eichhorst, President of Expedia Inc EXPE's CruiseShipCenters, told Benzinga. 

Industrywide European cruise demand appears strong from North Americans and locals, a positive sign for Norwegian after a setback in the region in 2016, according to Suntrust’s advertised pricing survey.

The Carribean, Mexico and the Bahamas are destinations that are seeing solid increases, and Alaska continues to see robust demand, according to SunTrust. 

“The upper end of the industry appears to be absorbing capacity nicely and agency insights indicate that capacity growth has not driven ‘predatory pricing,'" the analyst said. "Again a positive for NCLH, as of the big three they have the greatest exposure to the upper end." 

SunTrust raised 2018 EPS estimates from $4.55 to $4.60.

Price Action 

Norwegian Cruise Line shares were up 3.28 percent at $59.27 at Wednesday's close. 

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