Investing.com -- Loop Capital upgraded Norwegian Cruise Line (NYSE:NCLH) Holdings to Buy from Hold on Monday, citing a nearly 40% year-to-date drop in the stock and a positive outlook following the launch of the company’s newest ship, Aqua.
The firm maintained its $25 price target, based on a discounted cash flow model.
“We are favorably disposed to the entire cruise industry, as we think market share gains would be even more likely in a recession,” Loop Capital wrote. “NCLH’s offerings boast a roughly 30% discount to equivalent land-based vacations.”
The analysts highlighted strong onboard spending and resilient close-in pricing trends based on channel checks.
“Management did mention that it remains in its sweet spot of two-thirds booked for the next 12 months. We think that implies significant earnings visibility for the next two quarters.”
Loop Capital also sees upcoming earnings as a potential catalyst. “We see the company’s April 30 earnings report as a potential positive catalyst for the stock.”
The debut of Norwegian Aqua, the company’s first Prima Plus ship, was said to be another bullish factor.
“The new ship addresses consumer feedback with more deck space, adds innovative features for gamers and water park enthusiasts, and includes larger up-market Haven Suites,” the analysts said, adding that the ship “should support elevated pricing relative to the rest of the NCL fleet.”
Loop Capital also pointed to progress on infrastructure at the company’s private island in the Bahamas, Great Stirrup Cay, where a pier is under construction.
“It may seem prosaic, but we think digging up the beach at its private destination, Great Stirrup Cay, may be the single most important initiative for NCLH this year,” they said, noting the pier is expected to cut down on guest wait times and support new premium offerings.
“We think the stock is pricing in fundamentals well below our targets,” Loop concluded.