Goldman Sachs Forecasts Strong 2025 for Cruise Sector
Investing.com — Goldman Sachs is optimistic about the cruise sector, predicting a robust year ahead and upgrading Norwegian Cruise Line (NYSE:NCLH) to a Buy rating in a note released this Tuesday.
The investment bank anticipates the successful momentum from 2024 will carry into the next year, identifying the cruise industry as the "key winner" among leisure and lodging stocks for 2023.
Demand vs. Supply
Goldman Sachs expects demand to greatly outstrip supply, enhancing pricing power within the sector.
> "We expect a solid 2025, with another stellar year for cruise," states the investment bank, underscoring that growth will largely stem from an increase in new-to-cruise passengers, projected to rise by "mid-teens y/y."
Market Opportunities
The firm highlights that the current market penetration for cruises remains relatively low, indicating significant room for expansion. Additionally, they note that the “value gap vs. land” for cruises is wider than historical levels, thus presenting further upside potential.
Key Themes for Stock Picking
Goldman Sachs identifies several crucial themes for stock picking, such as the favorable impact of new private islands and ship launches. These unique elements are expected to reinforce pricing power for cruise lines, particularly as pent-up demand from prior years begins to subside.
Specific Outlook for NCLH
Focusing on NCLH, Goldman Sachs has raised its price target to $35, reflecting a 27% upside. They cite an increase in Net Purchase Intent and considerable cost savings yet to be realized.
The firm forecasts that NCLH could achieve a "2.5ppt yield to unit cost spread" in 2025, which could enhance estimates and diminish its valuation gap compared to competitors.
> They believe this will "provide upside to estimates and begin to narrow the valuation gap to RCL."
Goldman Sachs' positive outlook for the cruise sector is evident in its sustained Buy ratings for other prominent cruise lines, including Carnival Corporation (LON:CCL) and Royal Caribbean (NYSE:RCL).
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