Citi Analysts Disembark From Norwegian Cruise Line, Say Royal Caribbean Looks Ready To Board

Citi has removed Norwegian Cruise Line Holdings Ltd (NASDAQ: NCLH) from its U.S. focus list, saying Royal Caribbean Cruises Ltd (NYSE: RCL) is the best positioned stock in the sector.

The brokerage, which noted that all cruise stocks should perform well in the next 12 months, removed Norwegian Cruise from its U.S. Focus List, as its checks showed that NA-sourced demand for European cruises have worsened over the last few weeks. Of note, Norwegian Cruise sources primarily from North America for its European sailings.

On the other hand, Citi said Royal Caribbean's overall booking and pricing trends have likely improved since its second-quarter results on August 2, and the company should be therefore on track to at least meet 2016 guidance.

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"Importantly, RCL's 2017 bookings likely remain very strong with volume and pricing both up likely around mid-single digits — very well positioned for 2017, particularly given low investor expectations," analyst Gregory Badishkanian wrote in a note.

Badishkanian maintains his Buy rating on both Norwegian Cruise and Royal Caribbean shares, with price targets of $58 and $95, respectively. Based on Monday's close, the price target of Norwegian Cruise represents a potential upside of about 54 percent, while Royal Caribbean shares offer upside of 36 percent.

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