By Mackenzie Tatananni

Norwegian Cruise Line Holdings and other cruise operators are on course for a recovery, after a tumultuous few months underscored by economic uncertainty, Citi Research says.

Analysts led by James Hardiman wrote Thursday that President Donald Trump's April 2 tariffs announcement kicked off a period of industry-wide weakness. However, this trend appears to have reversed, according to the firm's analysis of web traffic and third-party pricing data, which showed a "sequential improvement" from April to May.

Carnival was the only cruise operator in Citi's coverage universe that deteriorated month over month from March through May. On average, the company saw web traffic decline 9% in April and 11% in May.

This shouldn't come as a surprise to investors following the company. When Carnival reported fiscal-first-quarter earnings at the end of March, it posted record revenue and raised its fiscal-year guidance. But management also conceded that the cruise line wasn't immune to macroeconomic volatility, causing shares to fall.

However, web visits have since improved and were down just mid-single digits in percent terms in late May. Citi reaffirmed a Buy rating on Carnival stock and raised the price target to $28 from $25. Shares were up 1.8% to $24.25 on Thursday.

Royal Caribbean Group saw web traffic decline 5% in April and 4% in May. A traffic drop in the "low single digits" in the last week of May appeared to signal a turnaround, Citi said.

Norwegian fared slightly better, as web traffic fell just 1% in April and was roughly flat in May. For the last week of the month, traffic was in the low single-digits, Citi said.

The firm maintained a Buy rating for both stocks. Citi raised its target price on Royal Caribbean to $318 from $268. Shares were up 1.7% at $270.04 on Thursday.

The firm raised its price target on Norwegian only slightly, to $25 from $24. The stock was up 6.2% at $19.54. As of Thursday afternoon, it was the second-best performer in the S&P 500.

While web traffic for Viking Holdings declined 9% in April, it "improved meaningfully in May," the analysts said, with the most recent data showing 12% growth in the last week of the month. Like Caribbean, Viking logged a solid first quarter, but the fine details caused investors to question the cruise line's ability to sustain pricing growth throughout the year.

Citi raised its price target on Viking shares to $57 from $52 and reaffirmed a Buy rating. The stock was up 1.5% at $47.84 on Thursday.

Much like web traffic data, third-party pricing data also showed an improvement in May from April. Industry-wide pricing grew 3% in May, compared with 1% to 2% between February and April.

Carnival saw the most pricing growth in May, up 8% year over year, though this was down from 14% growth in April. And while Norwegian saw "flattish pricing growth" last month, this was a notable improvement from a 1% decline in April.

Given recent stability in pricing data, "it would appear the cruise operators are maintaining discipline for now given that most of the capacity is booked through 2025 and they can afford to wait to see if the macro picture improves," the analysts wrote.

In Citi's view, April very well may have been the bottom. Expect smoother sailing ahead.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

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June 05, 2025 13:31 ET (17:31 GMT)

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