Since the brokerage's last check in mid-September, pricing has strengthened across NCLH’s Caribbean deployed fleet, particularly in the first half of 2015, with the exception of New York-based Norwegian Breakaway in Q4 2014 due to competitive pressure from Royal Caribbean's Quantum of the Seas.
'Caribbean pricing is poised to recover in 2015 as industry capacity growth pressures abate against easy comparisons,' Wells Fargo analyst Tim Conder said in a note. Caribbean industry capacity growth peaked in Q3 and will be down 9% in Q3 2015, he added.
Norwegian should benefit given its higher overall relative 45% exposure to the Caribbean in 2015, compared to 34% for Carnival and 44% for Royal.
'But we continue to question if industry entry-level brands in the Caribbean will recover as much as expected by investors or premium brands given bifurcation of the consumer,' Conder said.
Wells Fargo held its 2014 and 2015 estimates of $2.29 and $2.64 per share, respectively, and its $39 to $41 valuation range. The 2015 EPS estimate does not reflect Norwegian management's indicated 7% to 9% accretion, of 18 cents to 25 cents per share, from the Prestige Cruises International acquisition and related refinancings.
'Bottom line: We remain constructive on NCLH shares,' Conder said. The brokerage rates the stock 'outperform' (buy).
Norwegian opened at $36.57 on Wednesday.