Stifel Cuts Target On Norwegian Cruise From $69 To $55 Ahead Of Q2 Earnings

Stifel has cut the price target on the shares of Norwegian Cruise Line Holdings Ltd NCLH to $55 from $69 and warned that the company could lower its 2017 EPS target of $5.

"[W]e believe continued European sourcing headwinds and higher refurbishment spending across the fleet have put NCLH's 2017 $5 EPS target in serious jeopardy," analyst Steven Wieczynski wrote in a note.

Accordingly, ahead of the company's second-quarter earnings release during the first week of August, the analyst trimmed his 2016–2017 out-year EPS forecasts by 3 percent and 13 percent, respectively. The analyst now sees EPS of $3.65 for 2016 and $4.38 for 2017.

Wieczynski also slashed his 2016 revenue forecast to $3.86 billion from $3.87 billion and 2017 estimate to $4.23 billion from $4.29 billion.

That said Wieczynski reiterated his Buy rating on the stock.

"All told, even after trimming our estimates to levels we view as comfortably conservative, we continue to see a clear cut case for owning NCLH shares at current levels," the analyst highlighted.

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Wieczynski still believes a "steadfast focus on margins/ROIC, healthy Caribbean/AK demand/pricing fundamentals, and the emerging Chinese growth opportunity position the group to outperform the broader market over longer duration investment horizons."

For the second quarter, the analyst forecast net revenues of $930 million and EPS of $0.80 versus current consensus of $929 million and $0.83, respectively. The company expects EPS of $0.80 to $0.85.

"We expect reported EPS to come in near the low end of management's $0.80 to $0.85 range, potentially underperforming relative to current consensus expectations," Wieczynski noted.

"At this point, we believe current net yield consensus is too high, as it fails to fully capture the incremental softening in the North American consumers' demand for European travel that we believe occurred in the quarter," the analyst added.

On the valuation front, shares of NCLH are trading at a "seemingly modest" 9x Stifel's revised 2017 EPS estimate and the analyst expects investors not to be surprised if the company opts to cut its 2017 EPS outlook given the softness in shares year-to-date.

At the time of writing, shares of Norwegian Cruise fell 1.12 percent to $39.69.