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Cruise Stocks Rise on Goldman Upgrade of Norwegian

Shares of cruise lines gain after Goldman Sachs upgrades Norwegian Cruise Line amid expectations of a strong post-pandemic rebound in demand.

Shares of cruise lines gained Wednesday after Goldman Sachs upgraded Norwegian Cruise Line  (NCLH) - Get Norwegian Cruise Line Holdings Ltd. Report to a buy and also raised the price target on the stock amid what the firm sees as a strong post-pandemic rebound in cruising demand.

In a note to clients, Goldman Sachs analyst Stephen Grambling said he was raising his rating on Norwegian to buy from neutral and also lifting his one-year price target to $37, which if realized would mean a 38% increase over the most recent closing price.

Grambling pointed to three factors behind the upgrade: industry-leading capacity growth, exposure to more “aspirational customers” and “… the longest liquidity runway and lowest leverage on fully recovered EBITDA.”

Norwegian and rival Royal Caribbean Cruises  (RCL) - Get Royal Caribbean Group Report have been gunning to hit the high seas after more than a year of being docked due to the global pandemic. Cruise lines in particular bore the brunt of bad public relations at the onset of the pandemic amid close-quarters outbreaks that highlighted COVID’s contagiousness.

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Royal Caribbean CEO Richard Fain on Tuesday made encouraging remarks about the industry’s recovery in a video address. Royal Caribbean has formally requested the Centers for Disease Control allow it to relaunch cruises that originate in the U.S. on July 4.

Both companies have pledged to implement stringent health protection measures for crew members, including mandatory vaccinations and widespread testing.

Royal Caribbean last month said it planned to resume Caribbean sailings in June, starting from the Bahamas. Carnival  (CCL) - Get Carnival Corporation Report hasn't yet pinned a start date for its U.S.-based cruises, though analysts expect see a mid- to late-summer restart.

At last check, shares of Norwegian Cruise were up 3.59% at $27.71, while shares of Royal Caribbean were up 0.83%% at $81.75. Carnival shares were up 1.09% at $26.01.

Too Late to Buy Cruise Stocks? Let's Look at Norwegian