Barclays says it's time to buy cruise stocks

Published Fri, Sep 25 20208:00 AM EDTUpdated Fri, Sep 25 20204:01 PM EDT

(This story is for CNBC Pro subscribers only.) Barclays said Friday it's time to buy cruise stocks because the group is nearing an "inflection point" with a possible lift to the no-sail order next week. The Wall Street firm upgraded shares of Royal Caribbean , Carnival and Norwegian Cruise Line to overweight from equal weight, sending shares of the group surging. Norwegian popped 13.7% while Carnival gained 9.7% and Royal Caribbean was up 7.7%. "While we may be early, we believe the risk/reward is the most attractive in our coverage universe," Barclays analyst Felicia Hendrix told clients. "Investors who have previously written off cruise stocks should begin to revisit their models." The cruise industry was one of the hardest hit due to the coronavirus pandemic. Shares of the cruise stocks plummeted in March as the nationwide lockdown forced the cancellation of cruises. The Centers for Disease Control and Prevention next week will address the no-sail date for the industry. While Barclays said there a high probability the CDC will extend the no-sail date in the fourth quarter, Hendrix said "the comments from the agency will be positive and could signal a near-term return to cruise, which could be a catalyst for the shares." "A 4Q20 start date combined with positive language bodes well for sentiment, as it removes uncertainty and importantly, concerns about liquidity," Hendrix added. Barclays downgraded cruise stocks in June, saying their stock recovery was going too fast and there was little clarity on the direction of the industry. Now, Barclays said, Germany and Italy have started cruises with no incidents, bookings data for the sector is indicated as pent-up, and the CDC is working closely with the American cruise companies. "Further, COVID-19 testing has become more pervasive and news flow on a vaccine has become more positive. Even if the CDC extends the no sail date farther than expected, we believe the worst is in the past for the sector," said Hendrix. Barclays also raised its price targets for the group. For Carnival, it's now $31 per share from $18; for Norwegian to $26 per share from $17; and for Royal Caribbean to $68 per share from $50 — with reporting from CNBC's Michael Bloom.

A woman wearing a face mask as a preventive measure against the spread of the COVID-19 Coronavirus, runs with Cruise Ships docked in the background at the port of Long Beach, California on April 11, 2020.

Apu Gomes | AFP | Getty Images

(This story is for CNBC Pro subscribers only.)

Barclays said Friday it's time to buy cruise stocks because the group is nearing an "inflection point" with a possible lift to the no-sail order next week.

The Wall Street firm upgraded shares of Royal Caribbean, Carnival and Norwegian Cruise Line to overweight from equal weight, sending shares of the group surging. Norwegian popped 13.7% while Carnival gained 9.7% and Royal Caribbean was up 7.7%.