RCL Vs NCLH Vs CCL: Why A Wall Street Analyst Picked Royal Caribbean And Got Cautious On The Rest

BMO said Royal Caribbean has stronger execution, customer retention and better long-term upside.

• BMO named Royal Caribbean its top cruise pick with a $370 price target, implying 31% upside.
• BMO said Norwegian Cruise Line’s premium positioning is appealing but weaker performance versus peers raises concerns. 
• BMO sees limited near-term catalysts for Carnival after its financial restructuring. 

Royal Caribbean Group (RCL) emerged as BMO Capital's top cruise stock after the firm initiated coverage of the sector, assigning the company an ‘Outperform’ rating while starting Norwegian Cruise Line Holdings (NCLH) and Carnival Corp. (CCL) with ‘Market Perform’ ratings.

Analyst Tristan Thomas-Martin said favorable industry trends continue to support the sector, but company-specific factors are likely to determine which operators outperform.

BMO Sees More Upside For RCL Despite Recent Rally 

BMO named Royal Caribbean its top choice among cruise operators, setting a $370 price target and citing the company's ability to retain existing guests while attracting first-time passengers. 

The price target implies a 31% upside from Royal Caribbean’s last close. 

The analyst said improving industry conditions, including expectations for easing geopolitical and oil-related pressures, should support the business. Even after the stock climbed roughly 12% over the past month, BMO believes its valuation remains reasonable relative to its growth prospects.

For fiscal second quarter (Q2), analysts expect $4.8 billion in revenue with earnings of $3.93 per share, according to Fiscal AI data. 

Royal Caribbean’s stock edged 0.3% lower overnight on Tuesday. 

Norwegian Cruise Line Faces More Challenges

Analyst Tristan Thomas-Martin said Norwegian's premium positioning remains attractive, though several company-specific issues temper the investment case. The cruise line operator was assigned a $21 price target. 

According to the analyst, Norwegian enters this phase with several hurdles, including financial and operating performance that has trailed key rivals, ongoing activist investor involvement and a challenging business environment. Taken together, those factors led BMO to conclude that the company "raises the most questions in the cruise space.”

Analysts expect Q2 revenue of $2.6 billion with earnings of $0.38 per share. 

Norwegian Cruise Line inched 0.3% lower overnight on Tuesday. 

Carnival Lacks A Near-Term Driver

BMO also maintained a balanced outlook on Carnival with a $30 price target, saying it sees few immediate catalysts beyond the industry's positive demand environment. 

The analyst said Carnival has largely completed its financial restructuring and is now focused on boosting cash flow and improving fleet efficiency, making a major near-term stock revaluation less likely. 

Carnival posted Q2 revenue of $6.6 billion with earnings of $0.41 per share, both exceeding the Street estimates. 

Carnival stock edged 0.1% lower overnight on Tuesday. 

What Are RCL, NCLH, CCL Retail Traders Saying 

On Stocktwits, retail sentiment around Royal Caribbean remained in ‘bullish’ territory while sentiment around Norwegian Cruise turned to ‘neutral’ from ‘bullish’ territory the previous day. 

Retail sentiment around Carnival stayed in ‘bearish’ territory. 

A user said, “Bought 300k each of all 3 cruise lines. Will recover, always does. Got lots more powder if it drops more.”

Another user said, “$NCLH until their debt burden decreases or FCF increases they will remain out of investment grade status and only traded until then.”

A third user said, “Curiously, RCL has sold off when oil sold off. But any hint of a regime change in Cuba and this could bounce hard.”

So far this year, RCL stock has gained 1%, while NCLH and CCL stocks have slumped 15% and 12%, respectively. 

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