Citi Becomes More Optimistic on Cruise Stocks

Citi analysts have expressed growing optimism about cruise stocks, identifying significant growth potential through 2025 and beyond in a report released on Wednesday.

In their analysis of the cruise industry, Citi observed that while some may interpret the recent surge in cruise stocks as merely a “catch-up trade,” the bank believes this upward trajectory carries more enduring promise.

Citi is particularly positive about Norwegian Cruise Line Holdings, Royal Caribbean, and Carnival Corporation, expecting over 20% compound annual growth rates (CAGRs) in earnings per share (EPS) over the next three years, along with potential stock price increases exceeding 40%.

The analysts upgraded Norwegian Cruise Line from Neutral to Buy, adjusting its price target to $30. They believe that a strategic shift at Norwegian Cruise Line will allow the company to take advantage of pricing opportunities without being hindered by rising costs. Citi forecasts a 23% three-year EPS CAGR for Norwegian Cruise Line, with the possibility of even higher growth if the company can maintain its targeted yield/cost spread of 2.5%.

Additionally, Citi has issued a 90-day positive outlook for Royal Caribbean, anticipating the introduction of a new long-term strategy, potentially named “Vision 20/20,” following its next earnings report.

Citi projects Royal Caribbean’s EPS could reach $20 by 2027, significantly higher than current market expectations, which may lead to considerable earnings revisions and stock appreciation. The new price target for Royal Caribbean is set at $253.

The analysts suggested that “Vision 20/20” could be unveiled with Royal Caribbean’s upcoming long-term plan, tentatively scheduled after the third or fourth quarter, assuming their EPS CAGR and $20 EPS forecasts are accurate.

While Carnival is viewed as the slowest growth story among the trio, Citi underscored its debt-reduction strategies that are expected to support a 24% three-year EPS CAGR, setting a price target of $28 for the company.

Citi also pointed out robust web traffic and favorable pricing trends, especially for bookings in 2025, further supporting their positive outlook on the cruise sector.