U.S. Cruise Operators Stocks Surge

(Reuters) – Shares of U.S. cruise operators surged in midday trading on Wednesday, buoyed by Citi’s bullish outlook on their long-term prospects.

Norwegian Cruise Line (NYSE:NCLH) saw its shares rise by as much as 11% after being upgraded by Citi from "neutral" to "buy." Meanwhile, Royal Caribbean (NYSE:RCL) reached an all-time high of $263, with shares climbing as much as 5%. Carnival (NYSE:CCL) also experienced a share surge of nearly 9%.

Cruise operators have shown strong performance this year, driven by healthy demand for sea-based vacations and rising ticket prices. Americans are increasingly spending on experiences rather than goods, leading to record bookings for affordable cruises.

Citi noted that September’s cruise traffic was one of the best on record, with positive pricing data extending into 2025 and beyond, based on web traffic analysis.

Citi analyst James Hardiman stated, "Norwegian's shift in strategy from quality at all costs to a more balanced yield/cost relationship gives us confidence that the considerable pricing power and the company's increased focus on costs 'can't help but bear fruit.'"

The brokerage updated its price targets, raising them to $30 from $20 for Norwegian Cruise, $253 from $204 for Royal Caribbean, and up $3 to $28 for Carnival.

Both Royal Caribbean and Norwegian Cruise are expected to grow their capacities at a robust 6% annual rate over the next three years, which Citi identifies as a primary driver of their revenue growth.

Year-to-date, shares of Royal Caribbean, Norwegian Cruise, and Carnival have risen 50%, 14%, and 9%, respectively, including session gains.

Currently, Norwegian Cruise's forward price-to-earnings ratio for the next 12 months stands at 11.05, compared to 13.99 for Royal Caribbean and 11.31 for Carnival.