Norwegian Cruise Line (NCLH) downgraded at UBS despite improving demand

Norwegian Cruise Line (NYSE: NCLH) was downgraded to Neutral from Buy, with the price target cut to $19 from $24 per share by UBS analyst Robin Farley.

Farley said in a note to investors released late Monday that the current risk/return on the stock is less favorable.

"We are downgrading NCLH to Neutral from Buy following the stock's 30%+ move since Oct, while the S&P is up +10%, since we believe the risk/return is skewed less favorably now," writes Farley.

Despite UBS seeing the current demand environment improving for Norwegian, the firm also believes there is see some "uncertainty in the outlook for NCLH's cost performance."

"Even if NCLH can do better than mid-teens growth in expense ex-fuel in 2023 compared to 2019, the +17% growth in capacity should be bringing better scale to bear, in our view. NCLH says the expense guidance is something they hope to beat, but that investors should not necessarily expect that to mean upside to 2023 EBITDA guidance of $2B," the analyst concluded.

Norwegian shares are down more than 3% so far in Tuesday's session.

By Sam Boughedda

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