Wells Fargo analysts upgraded shares of Carnival Corp. (NYSE:CCL) to Overweight and downgraded Norwegian Cruise Line (NYSE:NCLH) to Equal-Weight in a note Friday covering gaming, lodging, and leisure stocks.
CCL, which is one of the firm's top picks, has a higher FY24 EBITDA growth that will allow it to delever more quickly than NCLH, said the bank.
"CCL's fundamentals, mgmt execution, and communication have improved, and with its recent 4Q report, we believe CCL threaded the needle for upward est. revisions over the course of 2024," wrote analysts at the firm. They maintained a $22 price target on the shares.
For Norwegian, Wells Fargo feels that it has "bounced nicely off its 4Q23 lows," but they see the risk/reward as even at current levels. The bank maintained a $18 price target on the stock.
"We don't think the bull case for 2024 is off the table (2023 laggard, easy y/y comps from sacrificing short-term compression for longer-term premium itineraries sailing in FY24, low bar/expectations, etc.), but see valuation at 9.3x 2024E EBITDA as fair here, given NCLH's elevated leverage profile (7x YE23, ~5.7x YE24) and mixed execution," Wells Fargo explained.
The firm also said that they expect NCLH to guide conservatively for FY24 but believe it is less clear how it will be received or where upside hopes will form.