For the cruise industry, as the Caribbean market becomes oversaturated and the potential end of the Ukraine war looms, Europe will become the key battleground by 2026, allowing$Carnival (CCL.US)$and$Viking Holdings (VIK.US)$and other operators to gain a competitive edge over their rivals.
David Katz of Jefferies stated, "Our view is that operators with significant exposure to the European market should benefit compared to those focused on the Caribbean." While he remains optimistic about the entire cruise industry, he noted that certain companies would stand out in 2026 due to favorable geopolitical developments and superior operational performance.
With continuously improving business quality and minimal capacity growth,$Carnival (CCL.US)$remains Katz's top pick in the leisure and entertainment sector.
Katz reiterated his "Buy" rating for Carnival and stated, "We believe the disciplined capacity growth approach adopted by the world’s largest operator is prudent, as Carnival can focus on per-ship pricing growth through targeted marketing expenditures. Additionally, we view Carnival as significantly undervalued relative to its peers and its own historical levels."
Despite its large presence in the Caribbean, Carnival owns brands focused on Europe, including its historical ties to St. Petersburg, Russia—a top global cruise destination prior to the war—which are expected to benefit once the conflict in Ukraine ends.
Similarly,$Viking Holdings (VIK.US)$is also set to benefit in 2026 from its Europe-centric itineraries and positioning towards high-income consumers. Katz believes that Viking's performance should enable it to "deliver at least $500 million in capital returns by the end of 2027 while maintaining a leverage ratio below 1.0x."
Katz stated, "Despite the stock's strong performance in 2025, we clearly see that its business quality and growth trajectory remain intact." He upgraded Viking's rating from "Neutral" to "Buy" and raised its price target by 33% to $80.
Katz forecasts that Viking will achieve a "market-leading" 5% net revenue growth in fiscal year 2026, followed by 4% growth in fiscal year 2027, along with double-digit growth in adjusted EBITDA for the 2026-2027 fiscal years.
As Europe becomes the focal point for the cruise industry,$Norwegian Cruise (NCLH.US)$its decision to reallocate 10% of its European-deployed fleet to the Caribbean not only appears untimely but could also disrupt normal booking patterns and create headwinds for revenue as the company employs short-term discounts to meet occupancy targets.
Furthermore, Norwegian Cruise has shifted its focus to targeting "high-end family" demographics to boost occupancy, adding another pressure point for pricing. Despite the company's "admirable cost-control efforts," net revenue growth may slow next year, "diminishing our expectations for near-term leverage improvement."
As a result, Katz of Jefferies downgraded Norwegian Cruise from 'Buy' to 'Neutral' and reduced its target price by 23% to $20.
Finally,$Royal Caribbean (RCL.US)$Maintain a "neutral" rating as the company remains a "high-quality operator" with a strong management team and business model. However, robust tailwinds from land-based assets may be offset by anticipated pricing weakness in 2026, while Norwegian Cruise's shift to the Caribbean will have a more pronounced impact on Royal Caribbean compared to its peers.
For 2027, Katz expects Royal Caribbean to experience stronger growth as more land-based assets become fully operational, such as the Royal Beach Clubs in the Bahamas, Santorini, and Cozumel. Over the long term, Royal Caribbean's leadership in technology and innovation is expected to continue.
$Royal Caribbean (RCL.US)$、$Carnival (CCL.US)$、$Viking Holdings (VIK.US)$and$Norwegian Cruise (NCLH.US)$Both stocks rose approximately 3% on Monday, with Royal Caribbean slightly outperforming.
Editor/melody