1 Wall Street Firm Thinks Norwegian Cruise Line Stock Is Going to $24. Is It a Buy?

Analysts at one Wall Street firm think investors could book some big profits by investing in Norwegian Cruise Line (NCLH -0.42%) stock right now. In a new research report, Mizuho Securities analysts Ben Chaiken and Alok Patel upgraded their firm’s rating on the cruise operator from neutral to buy. They also boosted their share price target from $21 to $24 — around 45% higher than its recent price. The analysts wrote that they see overall market sentiment shifting for the stock, and provided three main reasons for their optimistic view.

Cruising into profits

The analysts noted that Norwegian stock has had relatively high short interest during the last two years. Pressure from short-sellers has been decreasing, however. That trend, combined with company-specific initiatives, gave them confidence that the stock is due to move higher after its drop of nearly 20% year to date.

That lower stock price was the first reason Mizuho gave for its upgrade. Norwegian’s stock has been underperforming its peers, but management now has a new strategy in place, and if it successfully executes on it, Mizuho expects the cruise giant will be rewarded by investors, pushing its stock price up.

One aspect of the strategy Norwegian executives presented earlier this month was to cut costs and bring profit margins closer to their historical levels over the next two years. The company expects annual cost savings of up to $300 million upon completion of the multiyear plan. The analysts’ third reason for optimism was the company’s operating efficiency initiative. They expect Norwegian will be able to add to its profits by simplifying travel itineraries.

Mizuho’s analysis makes sense. Norwegian management has a plan in place to boost profitability. It has already increased its guidance for 2024 net income twice in the last month. That, along with strong demand and limited supply, makes a good case for Norwegian’s stock to rebound soon.