Jefferies sees more outperformance ahead for this cruise stock after year-to-date rally
Jefferies is moving to a more bullish stance when it comes to Viking . The bank upgraded the cruise stock to buy from hold. It also hiked its price target to $80 from $60, which implies upside of 16% from Friday’s close. “We are upgrading the stock on visibility to continued strong growth in revenue, Adj. EBITDA, and Adj. EPS, paired with coverage-leading ( > 100%) FCF conversion,” analyst David Katz said. VIK YTD mountain VIK YTD chart Katz applauded Viking’s industry-leading pricing and “beneficial positioning in luxury,” thanks to its “resilient upper-income consumer.” He also noted that the company has managed to expand its margins, while maintaining moderate unit costs. Another boost for the stock is the company’s lack of Caribbean exposure. This means Viking it could hedge against potential headwinds from Norwegian Cruise Line’s shift there while benefiting from a reduction in European capacity. “We believe that VIK’s performance should allow for at least $500M in capital returns through YE27 alongside a sub 1.0x leverage profile, providing Mgt. with ample resources should any M & A opportunities arise,” he wrote. The analyst added that Viking is likely to continue improving on cost efficiency. Its margins are also like to expand, as the company realizes more efficiency of scale. Katz’s upgrade comes on the heels of a similar one from Goldman Sachs last week. Goldman analyst Lizzie Dove likewise cited Viking’s “differentiated geographic exposure and higher-income demographics” as tailwinds. Shares of Viking have surged 56% this year. The stock rose more than 1% in the premarket following the Jefferies upgrade.
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