By Senad Karaahmetovic
Credit Suisse analysts downgraded Norwegian Cruise Line (NYSE:NCLH) to Underperform from Outperform with a price target of $14 per share, down from $20.
While the analysts describe NCLH as a "quality" company, they see risk to estimates and valuation after the company "materially outperformed" year-to-date (YTD). Norwegian Cruise Line stock is down about 15% YTD, outperforming the S&P 500.
The three key drivers behind CS' downgrade of NCLH stock are:
- Risk to the '23 EBITDA "guide";
- Valuation premium vs. peers is likely unsustainable;
- NCLH hitting their guide implies more equity upside potential for RCL or CCL.
All-in-all, the analysts prefer Royal Caribbean (NYSE:RCL) to Norwegian Cruise Line.
"Normalizing for robust unit expansion, using YE '23 net debt (which captures new ship orders/capex), on street '23 estimates, NCLH is at a 1x EV/EBITDA premium to RCL and 3x premium to CCL, a spread unlikely to continue. Using our estimates, the spread is closer to 3x vs RCL. Adjusting for stock comp (which NCLH adds back and peers do not), the spread is even wider, by another ~0.8x," the analysts said in a client note.
As of 08:20 EST (13:20 GMT), Norwegian Cruise Line stock trades over 6% lower.