The Zhitong Finance App learned that Goldman Sachs believes that there is still room for improvement in the impressive performance achieved by cruise operators in the past year.
Lizzie Dove (Lizzie Dove), an analyst who recommended buying Carnival Cruises (CCL.US) and Royal Caribbean Cruises (RCL.US), said that investors who believe that the cruise stock market has peaked have overlooked a favorable environment where short supply will drive prices up.
In a report published on Wednesday morning, she wrote: “Investors are understandably wary of cruise stocks; however, we believe that the industry has undergone a fundamental structural shift, driving a better business model, and at the same time, some favorable factors for incremental pricing will also emerge.”
The stock price of Carnival Cruises rose 2.8% in the US stock market, while Royal Caribbean Cruises rose 2.1%. Meanwhile, the stock price of Norwegian Cruise Line (NCLH.US), which was initially rated “neutral” by Goldman Sachs, did not change much.
Dorff believes that, like Royal Caribbean Cruises' “Ocean Idol,” which debuted in January, the launch of a “giant cruise ship” may further stimulate demand for cruises, and the premium also means that it has better return potential.
She anticipates that giant luxury cruises will have an “halo effect” and that “gorgeous advertising and cruise ships with various facilities will attract customers' attention.”
She added that as the industry shows more rational behavior (such as fewer discounts to fill ships), continued improvements in pricing capacity, positive estimate revisions, and investments in land-based resorts (such as Carnival Cruises' Celebration Key) will all provide a “strong catalyst path” for cruise companies.
Among these three companies, Fiesta Cruises has the most favorable development prospects this year, Dove said. She said the company's guidance is slightly conservative as occupancy rates will rebound to a large extent. In addition to this, it is estimated that tourist destinations will have a reception capacity of around 10 million by 2028, so upcoming private island investments will also play a positive catalytic role.
Dorff said, “Although we think Carnival Cruises' stock price should be lower than its cruise peers due to its higher leverage ratio and higher execution risk, this low price is not necessarily necessary.”