Jefferies Raises Price Tragets On Carnival And Royal Caribbean Cruises

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Jefferies raised its price targets on Carnival Corporation CCL and Royal Caribbean Cruises Ltd RCL Monday but was bullish only on RCL.

RCL was rated a Buy and the price target was raised from $73 to $87 PT.  CCL was rated Underperform and its price target was raised from $33 to $36.

Analysts led by Ian Rennardson noted that his team’s “in-depth pricing analysis shows CCL is having to discount in the lates market more than its peers to fill its ships, putting pressure on overall pricing. We think this has been caused by under-investment in its fleet at the same time as peers upped the ante in terms of product quality and innovation. CCL may never catch-up.”

Rennardson commented that the “bull-case on CCL is largely built on the premise that after a number of years marred by one-off issues, net revenue yield growth will return to a 'normal' 4-5 percent, costs will be cut over the next few years and that there is significant upside risk to estimates. We disagree...almost three years after the Costa Concordia disaster CCL is still having to discount significantly more than its peers in the period 1 - 3 months before sailing, in order to fill its ships.”

“The cornerstone of our view on RCL has been that it offers a superior product, this is based on the following: it has a younger fleet, more new ships being built, more impressive features available (e.g. high-speed internet), a better strategy with respect to distribution of cabins (more Balcony berths available) and better brand perception,” according to Rennardson.

The analyst note concluded that RCL “has significantly outperformed CCL over the same period on price (as has its share price), this largely stems from the fast growing European market, where RCL has capitalised on reputational damage suffered by CCL and has resultantly opened up a significant gap in prices.”

Royal Caribbean Cruises Ltd traded at $77.99 in the pre-market,  down 0.48 percent.

Carnival Corporation traded at $44.14 in the pre-market, down 1.08 percent.
 

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Posted In: Analyst ColorPrice TargetAnalyst RatingsIan RennardsonJefferies
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