Loop Capital sets Norwegian Cruise Line stock at Hold

Tuesday, Loop Capital Markets initiated coverage on Norwegian Cruise Line Holdings Ltd (NYSE:NCLH) with a Hold rating. Laura Champine, an analyst at Loop Capital, highlighted the firm’s cautious stance on legacy cruise lines, including Norwegian Cruise Line, Carnival Corporation (NYSE:CCL), and Royal Caribbean Cruises Ltd (NYSE:RCL), stating that these stocks are currently trading at peak valuations. According to InvestingPro data, the cruise industry landscape is evolving rapidly, with newer players showing strong momentum.

Champine’s analysis suggests that the future direction of these stocks in 2025 will largely depend on whether there is a material demand slowdown in the industry. She indicated that the firm would wait for more cruise lines to release their 2025 guidance before making a more confident assessment.

In contrast, Champine expressed a more optimistic outlook for Viking (NYSE:VIK), initiating coverage with a Buy rating and a price target (PT) of $55, which implies a 10% near-term upside. The positive sentiment towards Viking is based on expectations of a higher growth rate and a stronger balance sheet with less debt compared to its peers. InvestingPro data supports this view, showing Viking’s impressive 92% return over the past year and robust revenue growth of 14%. While currently trading near its 52-week high of $51.99, InvestingPro analysis suggests the stock is slightly overvalued at current levels.

Loop Capital’s price targets for the legacy cruise lines are set close to their current share prices, with $25 for Carnival, $26 for Norwegian Cruise Line, and $250 for Royal Caribbean. These targets are derived from discounted Net Operating Profit After Tax (NOPAT) models.

The analyst also noted that Viking’s recent initial public offering (IPO) could indicate a greater focus on profitability. Viking, being the smallest public cruise line with significant river-based operations and newer ocean ships, is seen as having better growth prospects and various levers to improve profitability. While InvestingPro data shows the company isn’t currently profitable, analysts predict profitability this year. For deeper insights into Viking’s financial health and growth potential, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

In other recent news, Viking Holdings Ltd has made significant moves in its business operations, including leadership changes and fleet expansion. Leah Talactac, a long-standing executive, has been appointed as the new President of Viking. Notably, Talactac played a crucial role in Viking’s successful initial public offering in 2024. In addition to the leadership change, Viking also announced plans to expand its fleet, with eight new river ships set to be delivered in 2027 and 2028.

Goldman Sachs initiated coverage on Viking with a Neutral rating, citing valuation concerns despite strong bookings. Similarly, Barclays (LON:BARC) shifted its rating from Overweight to Equalweight, indicating slower upside potential for Viking shares compared to peers. On the other hand, Citi initiated coverage with a Buy rating, highlighting Viking’s advantageous position in the cruise industry.

Viking continues to grow its fleet with the addition of the new ocean ship, Viking Vela, which can accommodate 998 guests across 499 staterooms. The ship is designed to be hydrogen-ready, allowing for potential future retrofitting for partial hybrid propulsion. These are among the recent developments that continue to shape Viking’s business landscape.

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