Shares of the U.S. cruise lines rose the most in trading on Tuesday, with Carnival (NYSE: CCL) (NYSE: CUK) increasing 4.5%, Royal Caribbean (NYSE: RCL) running ahead 4.8%, and Norwegian Cruise Line Holdings (NASDAQ: NCLH) up to 5.5% on the day. You can probably thank Deutsche Bank for that.
The only news of these actions in recent days has been of the “bad, but expected” variety. On Monday, Carnival announced that it will extend its pause in navigation until September 30, and will only resume operations before October 1 at the earliest. Today, Royal Caribbean made a similar statement, suspending “most travel … excluding travel from China” until September 15, and suspending travel to Bermuda until the end of October.
All of this was in line with the announcement by the International Association of Cruise Lines (CLIA) on Friday that all of its member cruise lines (including Carnival, Royal Caribbean and Norwegian Cruise Line) will voluntarily extend the suspension of cruise operations from US ports USA Until September . fifteen.
What was not expected was that, despite the CLIA statement, German investment bank Deutsche Bank would decide today to increase its price targets on all three cruise stocks.
As the analyst explained in his note, TheFly.com reported today, “Key industry players are taking actions that will ultimately allow them to emerge from the COVID-19 recession in the best possible position to restore profitability.” And in light of the moves these companies have made to cut their costs, save the cash they have, and raise even more cash to overcome the recession across the industry, Deutsche believes each of the cruise lines are now worth more than what you thought before: $ 13 a share for Carnival, $ 15 for Norwegian Cruise and $ 40 for Royal Caribbean.
And yet each of these new price targets remains significantly below where the respective stocks are currently traded. At Tuesday’s close, Carnival and Norwegian shares reached more than $ 18 each, instead of $ 13 or $ 15. Royal Caribbean, which Deutsche Bank now admits could be worth $ 40 a share, currently costs $ 54 (and change).
Talk about a reverse compliment! While investors were encouraged by the larger number of people the bank moved with, it might have been better for them to focus on Deutsche’s remarks: Investor optimism about cruise stocks is “curious”, and cruise stock prices have gone too far, too fast. “
Once investors realize what Deutsche Bank really said, I wouldn’t be surprised to see these stock prices drop again.