Norwegian Cruise Line Holdings Ltd NCLH shares are trading higher after Mizuho Securities analyst Ben Chaiken upgraded the shares from Neutral to Buy and raised the price target from $21 to $24.
According to the analyst, valuation has completely reset after about 2 years of significant relative underperformance.
NCLH is streamlining its business like cost cutting, which should drive upside to near term/medium-term estimates, said the analyst.
In the context of a very favorable industry backdrop, the analyst sees upside to yields from NCLH optimizing its fleet itineraries, with a longer-term yield tailwind from further build-out of its private island portfolio.
The analyst felt the market was not properly encompassing the significant capex drag and impact
on the balance sheet from future ship orders.
The analyst, at this point, believes the risk/impact is fully reflected in valuation with NCLH trading at a 1x discount relative to Royal Caribbean Cruises Ltd RCL on ’25 estimates.
NCLH recently held an investor day that the analyst believes coherently outlined a path to substantially higher earnings.
The analyst’s $24 target price is based on a 9x ’25 EBITDA estimate of ~$2.6 billion.
However, valuation is now at a discount, and the analyst believes fundamentals are inflecting, which creates a compelling setup for the stock.
Price Action: NCLH shares are trading higher by 3.81% at $16.61 at the last check Tuesday.
Photo via Wikimedia Commons
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