Citigroup on Thursday launched coverage of the leisure sector and named its favorite cruise stock. The firm likes Royal Caribbean the most among the cruise lines. Citi initiated the stock with a buy rating and $105 price target, implying 19.3% upside from Royal Caribbean's closing price Wednesday. "We are generally optimistic with regards to consumer, particularly the high-end consumers who make up the lion's share of leisure customers," Citi's leisure and travel analyst James Hardiman said in a note. The note comes after Disney reported a surge in revenue from its parks business as more guests attended its theme parks, stayed in its branded hotels and booked cruises. Cruise stocks have struggled during the pandemic. Royal Caribbean lost 44% in 2020 and gained just 3% in 2021, when the S & P 500 rallied nearly 27%. "The Cruise sector was among the hardest hit by the pandemic, with real questions whether it would survive. Two years later, the cruise industry is just getting back on the water, and cruise stocks remain underwater," Hardiman. So far this year, however, Royal Caribbean is up 14.5%, compared with the S & P 500's 3.8% loss. Citi said Royal Caribbean had the "best momentum headed into the pandemic" and is "most likely to have the best as we exit." Royal Caribbean is the "best run cruise company," according to Citi. The firm also initiated shares of Carnival and Norwegian Cruise Line , both with "neutral/high risk" ratings. Citi put a $27 price target on Carnival and a $25 price target on Norwegian, implying upside of 16% and 5%, respectively, from the stocks' closing price Wednesday. —CNBC's Michael Bloom contributed reporting.
Royal Caribbean International's cruise ship 'Allure of the Seas' in Fort Lauderdale as seen from nearby Hollywood, Florida, November 11, 2010.
Joe Skipper | Reuters
Citigroup on Thursday launched coverage of the leisure sector and named its favorite cruise stock.