Norwegian Cruise Line Geared to Capture Upside, Analyst Says

Norwegian Cruise Line Holdings Ltd NCLH is likely to benefit from continuing sector momentum, according to JPMorgan.

The Analyst

JPMorgan analyst Joseph Greff upgraded shares of Norwegian Cruise Line from Neutral to Overweight and increased the price target from $62 to $70.

The Thesis

The upgrade is based on healthy industry demand and pricing trends; channel checks that revealed the most pricing momentum for Norwegian Cruise Line; and the attractive valuation of the shares, Greff said in a Monday note.

Despite holding Royal Caribbean Cruises Ltd RCL as his favorite pick in the cruise line space, the analyst said the entire sector will outperform thanks to strong macro and secular tailwinds — offsetting supply growth and fuel price headwinds.

Norwegian Cruise Line is best-positioned to capitalize on strong U.S. consumer demand, Greff said. 

When Norwegian reports fourth-quarter results later this month, JPMorgan expects a relatively upbeat quarter, with strength in the North American segment. Guidance toward moderate yield growth and earnings per share growth in the mid-teens for 2018 are projected, Greff said. 

Investors will likely focus on management's tone regarding China and Caribbean second-quarter trends, the analyst said. 

The Price Action

Norwegian Cruise Line shares are up about 24 percent over the past year.

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