Cruise line check: Norwegian Cruise Line and Royal Caribbean gain after Citi points to upside

Norwegian Cruise Line Holdings (NYSE:NCLH) shot up in early trading on Wednesday after Citi upgraded the cruise line stock to a Buy rating after having it set at Neutral. The firm pointed to the potential for big earnings upside and multiple expansion.

Analyst James Hardiman said Norwegian Cruise Line’s (NCLH) shift in strategy gives the firm confidence that the considerable pricing opportunity will not be offset by runaway costs. Hardiman and his team estimate 23% three-year EPS CAGR for the cruise line operator. The EPS growth is seen running as high as 30% if Norwegian Cruise Line (NCLH) can sustain its targeted 2.5% yield/cost spread.

Shares of Norwegian Cruise Line (NCLH) were up 3.95% in premarket action on Wednesday. The cruise line stock is up 3.79% on a year-to-date basis. NCLH has a consensus Buy ratings across Seeking Alpha analysts and Wall Street analysts. The Seeking Alpha Quant Rating on NCLH is also flashing Strong Buy due to high factor grades for revisions, growth, and profitability. The quant rating on NCLH ranks in the top 10% of all consumer discretionary stocks.

Citi also issued a positive catalyst watch on Royal Caribbean Cruises (RCL) on the expectation that the upcoming earnings report will include a long-term strategy update. RCL was up 1.99% in the premarket session.