BMO Capital Markets analyst Tristan M. Thomas-Martin initiated coverage across the cruise sector, amid rising fuel costs following tensions in the Strait of Hormuz.
Royal Caribbean Cruises
The analyst begun coverage of Royal Caribbean Cruises Ltd (NYSE:RCL) with an Outperform rating and price target of $370.
He named Royal Caribbean Cruises a top pick in the cruise sector, saying the company had retained cruisers in its ecosystem and attracted new ones.
The company is "thinking about the next leg of the industry’s growth via an expanding portfolio of shore offerings and entrance into the river segment," Thomas-Martin wrote.
The broader cruise industry tailwinds are favorable, with war and oil headwinds abating, the analyst said.
Despite the share price climbing more than 12% over the past month, the valuation does not appear unreasonable, he added.
Viking
Thomas-Martin initiated coverage of Viking Holdings Ltd. (NYSE:VIK) with an Outperform rating and price target of $115.
Although the stock valuation is high, "you get what you pay for," the analyst stated. Viking is positioned as a premium cruise operator and has "aspirational tailwinds," he noted.
Thomas-Martin also highlighted Viking’s "long-term growth algorithm of growing capacity (river & ocean) and yield expansion (MSD% target)." The company has an affluent customer base, a cohort that has exhibited resilience in the face of macro headwinds, he added.
Carnival
The analyst started coverage of Carnival Corporation Ltd (NYSE:CCL) with a Market Perform rating and price target of $30.
Carnival has completed refinancing and has a renewed focus on shareholder returns, Thomas-Martin said. He expressed concern, however, regarding:
- Ongoing pressures in Europe
- Potential weakness in the lower price-point of the consumer segment
- Outsized exposure to fuel costs given the lack of a hedging program
"Given the catalyst path is a little unclear and the ongoing macro headwinds, we think valuation is fair," the analyst further wrote.
Price Action: At the time of publication on Wednesday:
- Shares of Royal Caribbean Cruises had declined by 0.85% to $279.85
- Viking’s shares were down 2.91% to $97.10.
- Carnival’s stock had declined by 5.13% to $25.31.
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