Tuesday saw a decline for Norwegian Cruise Line Holdings (NYSE:NCLH), as UBS downgraded the stock’s recommendation from Buy to Neutral. After NCLH stock went up 30% in six months, analyst Robyn Farley and her team think the risk/return balance is now less in their favor.
“Although the demand climate is, in our opinion, improving, there is still some uncertainty in the forecast for NCLH’s cost performance.” “The +17% increase in capacity should, in our opinion, be bringing superior scale to bear even if NCLH can exceed mid-teens growth in expense ex-fuel in 2023 compared to 2019.”
NCLH Stock Forecast
From $24 to $19, or a target multiple of 10X, was UBS’s previous price target for NCLH. The new multiple is expected to be lower than the 12X multiple that was used before the pandemic. This is because the capital structure after the pandemic is harder to manage, so the new multiple needs to reflect that.
On Tuesday, shares of NCLH fell by 3.69%, while stocks in the consumer discretionary sector went up by a lot.
Main Catalysts
The occupancy levels have improved, which is good for the Norwegian Cruise Line. In keeping with what the business had anticipated, occupancy in the third quarter of 2022 was around 82%. The corporation had recorded 65% occupancy in the preceding quarter. The business anticipates an occupancy rate of mid-to-high 80% for the fourth quarter of 2022. Despite the possibility of seasonality-related headwinds continuing into the fourth quarter, the company anticipates sequential improvements in load factor and a reduction in the sequential gap (of around 20%) from 2019 levels. The business thinks that the increase in occupancy will last until the second quarter of 2023 and reach historical levels (100 percent or more). The benefits are probably increased by loosening COVID-related protocols.
As a means of fostering growth, Norwegian Cruise Line always seeks to expand its fleet. By 2027, eight more ships are scheduled to be introduced. Norwegian Cruise Line has ordered most of them, and Oceania Cruises and Regent Seven Seas Cruises will get the rest. One Explorer Class Ship is scheduled for delivery in 2023 under the Regent’s name. Two Allura Class Ships are being built by the business and will be delivered in 2023 and 2025 for the Oceania Cruises brand. Six new ships, anticipated to be delivered between 2022 and 2027, will be added to Norwegian Cruise Line’s fleet as part of Project Leonardo. Norwegian Viva, Oceania Cruises Vista, and Regent join Grandeur will be joining the business’s fleet in 2023, according to the company.
Nclh Stock Rises As It Opts To Drop COVID-19 Regulations
Featured Image: Unsplash @ Fernando Jorge
Author Jowi Kwasu 
