Norwegian Cruise Line Holdings Ltd. NCLH is sailing ahead at full throttle, delivering a stellar 35.6% rally over the past three months. The stock has also outperformed the industry and the S&P 500’s growth of 22% and 8.3%.
Propelled by robust investor enthusiasm, the NCLH stock now hovers near its 52-week high. As of Friday’s close, the company’s shares stood at $26.80, just shy of its 52-week high of $28.64 but significantly above its 52-week low of $14.69.
Price Performance
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The cruise industry as a whole has been buoyed by strong momentum. Royal Caribbean Cruises Ltd. RCL has outpaced its peers with a 45.9% jump in the past three months. Carnival Corporation & plc CCL and OneSpaWorld Holdings Limited OSW have delivered gains of 43.6% and 24.8%, respectively, in the same timeframe.
With the Norwegian Cruise stock on the brink of reaching new highs, the question is whether this is a short-term wave or if there is more room for smooth sailing ahead.
Fleet Expansion & High Demand Boost NCLH’s Performance
The company continues to benefit from fleet expansion efforts. Norwegian Luna, a new ship equipped with high-end amenities, is set to join the fleet in 2026. As a sister ship to Norwegian Aqua, Norwegian Luna introduces exciting upgrades to the Prima class experience. These enhancements include a 10% boost in guest capacity, the addition of lavish three-bedroom duplex Haven suites, and the debut of an innovative hybrid roller coaster water slide, set to premiere on Norwegian Aqua next year. Guests can also enjoy new activities and games, along with revitalized services at the Mandara Spa and Salon, as well as at the Pulse Fitness Centers.
Other brands under NCLH’s umbrella, such as Oceania and Regent Seven Seas, are set to launch vessels, each aiming to provide an exceptional experience. This continuous growth in capacity reflects the company’s commitment to staying ahead of the curve in the cruise market.
Strong consumer interest in cruise vacations continues to drive record demand, particularly in the premium and luxury segments. The company is benefiting from robust demand across all segments and geographies, particularly Alaska, Canada and New England.
During the third-quarterearnings conference call the company said that it recorded strong onboard revenue growth across various categories, with notable strength in shore excursions and communications. The latter has been significantly enhanced by the rollout of Starlink, which is now operational on 30 of the company’s 32 ships, and is expected to cover the entire fleet by the end of the year. Additionally, pre-booked onboard revenues have shown year-over-year growth of mid-single digits and nearly doubled from the 2019 reported level, reflecting robust consumer health and confidence.
The company’s forward 12-month bookings are at the upper end of its optimal range, signaling sustained demand across all brands and deployments. Pricing and occupancy for 2025 are tracking at or above the 2024 levels for all four quarters and the year, reinforcing optimism about its future performance.
Cost-Saving Efforts Aid Norwegian Cruise
Norwegian Cruise has been ahead of schedule in its efforts to achieve $100 million in cost savings by 2024 and is on track to realize $300 million in total savings, including fuel-related initiatives, through 2026. The company has reiterated its commitment to keeping unit costs below the inflation rate as it moves into 2025, building on the strong performance projected for 2024 and aligning with its long-term 2026 targets.
Recent cost-saving measures have notably enhanced margins. Over the last 12 months ending in the third quarter 2024, the company’s adjusted operational EBITDA margin improved approximately 900 basis points to 34.5%. For the year, Norwegian Cruise anticipates an adjusted operational EBITDA margin of 35.3%. This steady progress positions the company well to meet its 2026 target of returning to margins of around 39%.
Estimate Revision Favoring the NCLH Stock
Reflecting the positive sentiment around NCLH, the Zacks Consensus Estimate for earnings per share has seen upward revisions. In the past 30 days, analysts have raised their estimates for the current and next fiscal years by 0.6% to $1.64 and 1% to $2.05 per share, respectively. These estimates indicate year-over-year growth rates of 134.3% and 25.4%, respectively.
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Norwegian Cruise Stock Trades at a Discount
The company is currently valued at a discount compared with the industry on a forward 12-month P/E basis. NCLH’s forward 12-month price-to-earnings ratio stands at 13.16, lower than the industry’s ratio and the S&P 500's ratio of 22.69.
P/E (F12M)
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Conclusion
Norwegian Cruise presents a compelling investment opportunity due to its strong recent performance, fleet expansion and robust demand for its premium services. The company is benefiting from high consumer interest, particularly in its luxury and premium segments, and continues to see impressive growth in onboard revenues and pre-booked bookings, reflecting sustained confidence in the cruise industry. NCLH's efforts to reduce costs and enhance operational efficiency are paying off, with significant margin improvements. Its continued fleet growth, including new, high-end ships, positions the company for success.
Additionally, NCLH trades at a discount relative to its industry peers, making it an attractive buy as it capitalizes on expanding demand and solidifies its financial position for the long term. NCLH currently has a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Carnival Corporation (CCL) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
