Cruise line operators have been under significant pressure from soaring operating expenses due to rising oil prices.
The cruise industry’s outlook for 2024 and 2025 looks “exceptionally strong,” following conversations with travel agencies that specialize in cruises and examining data on future bookings and pricing, according to Truist Securities.
The Cruise Stock Rating Upgrades: Analyst Patrick Scholes upgraded the rating for Royal Caribbean Cruises Ltd RCL from Hold to Buy, while raising the price target from $115 to $137. The analyst also upgraded the rating for Carnival Corp CCL from Sell to Hold, while lifting the price target from $16 to $17.
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The Cruise Industry Thesis: Industry-wide sales for 2024 are tracking to about 55-60% of the pre-pandemic levels, while 2025 is up over 100%, Scholes wrote.
“While new supply for these years vs. 2019 is up approx. 20% and 25% respectively, demand clearly continues to outpace supply,” the analyst wrote. He added that the industry trends included “positive observations of strength in bookings and pricing with very minimal last-minute discounting, elongation of the booking window (though leveling-off), and reservation cancellations significantly down vs. comparable 2019.”
“Cruise stocks have cooled off since their July peaks (down 15%-30%) and we are now again recommending the sector,” Scholes further stated.
RCL, CCL Price Action: Shares of Royal Caribbean Cruises had risen by 2.46% to $98.28, while Carnival’s stock had added 1.06% to reach $15.20 at the time of publication Tuesday.
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