Market Overview

Bernstein Bullish On Cruise Sector But Cautious On Lodging, PowerSports

Bernstein Bullish On Cruise Sector But Cautious On Lodging, PowerSports

Bernstein analysts David Beckel and Apple Li are bullish on the cruise industry while remaining cautious toward lodging and powersports.

Beckel and Li analyzed seven stocks from the three different segments and selected four — Royal Caribbean Cruises Ltd (NYSE: RCL), Norwegian Cruise Line Holdings Ltd (NASDAQ: NCLH), Marriott International Inc (NASDAQ: MAR) and Harley-Davidson Inc (NYSE: HOG) — to Outperform in their respective sectors.


The brokerage pointed out that the cruise industry's valuation is at an all-time low. However, Beckel and Li believe the Chinese cruise market will drive demand. Therefore, there is no need to worry about accelerated supply from bigger ships in the upcoming years, as the analysts expect net revenue yield to grow between 2.5 percent and 3.5 percent until the year 2020 on balanced demand and supply.

Related Link: Penske Automotive And Norwegian Cruise Line CEOs Make Big Bets On Their Companies

Lodging And PowerSports

As far as lodging is concerned, Bernstein expects ambiguity continuing to hurt the industry. In a research note, the analyst said, "We believe the current lodging cycle will soldier on over a medium-term horizon in the absence of a broader demand shock, with RevPAR growth in the low single-digit range. Longer-term, we see Airbnb as a formidable, if uncertain threat, but we see limited risk in the medium-term."

On powersports, the brokerage sees challenging near-term outlook, pointing out the reversal of fortunes in the recent past with negative retail sales following a four-year solid growth. For the next one-year period also, the analyst failed to see any clear-cut demand from end-market.

Ratings, Valuation And Brief Justification

Bernstein assigned Outperform ratings to the following stocks:

  • Royal Caribbean Cruises: Target price is $90. The company is well-positioned to take advantage of the Chinese cruise market.
  • Norwegian Cruise Line: Price objective is $44. The stock is in the oversold category following the reduction in outlook for the current year and next year.
  • Marriott: Price tag is $87. The brokerage believes current valuation provided an attractive entry point for the long-term prospects.
  • Harley-Davidson: Price target is $84. The stock offered favorable risk/reward based on current valuation though near-term sales outlook for motorcycle remains uncertain.

The following stocks are assigned Market Perform ratings:

  • Carnival Corp (NYSE: CCL): Target price is $51. The company is not placed well in China relative to its peers to take advantage of the market apart from old hardware and multiple brand launches.
  • Hilton Worldwide Holdings Inc (NYSE: HLT): Price objective is $26. Expects modest upside potentials from the current levels.
  • Polaris Industries Inc. (NYSE: PII): Price tag is $87. Although limited downside is expected, the brokerage sees slowing dealer expansion for Indian brand.

At Time Of Writing ...

  • Carnival was down 0.98 percent at $44.42.
  • Harley-Davidson was down 1.29 percent at $51.36.
  • Hilton was down 2.48 percent at $22.83.
  • Marriott was down 1.96 percent at $68.66.
  • Norwegian Cruise was down 0.29 percent at $34.30.
  • Polaris was down 2.21 percent at $80.96.
  • Royal Caribbean was down 0.35 percent at $65.88.

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Latest Ratings for HOG

Apr 2019MaintainsOverweightOverweight
Apr 2019DowngradesNeutralSell
Apr 2019DowngradesOutperformMarket Perform

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