American travelers have grown increasingly wary of traveling to Europe as the wars in Ukraine and Iran show no end in sight. That's a big problem for Norwegian Cruise Line, which relies heavily on the U.S. market to fill up its European itineraries.
J.P. Morgan's Matthew Boss says he is concerned about the drop in U.S. demand for European trips. He predicts Norwegian's constant-currency yield growth -- the average amount of money it makes from each available cabin bed a day, stripping out currency swings -- will likely remain stagnant rather than grow in 2027. That forecast is well below Wall Street's consensus estimate for 0.8% constant-currency yield growth next year.
In the June quarter, Norwegian's constant-currency yield fell 2.6% year over year. But management saw this as a positive, since they previously projected a 3.6% decline.
Though net yields could rebound in the second half of 2027, the drop in cruise trip demand will still likely overshadow that potential recovery, Boss wrote in a note Friday. He downgraded the stock to Underweight from Neutral on Friday while trimming its price target to $11 from $13.
Norwegian Cruise Line didn't respond to a request for comment.
Geopolitical conflicts have remained a challenge for Norwegian, given that 85% of Europe itineraries for the cruise line operator were travelers coming from the U.S., Boss noted. That's the highest percentage of U.S. visitors to Europe across J.P. Morgan's cruise coverage.
Norwegian Cruise Line stock dropped 3.8% to $14.95 Friday. Shares have fallen 30% this year through Thursday's close.
Of the 29 analysts polled by FactSet, 18 have a Hold rating while two now recommend selling shares.
Rising oil prices have been another key headwind for Norwegian stock and other cruise operators. The recent climb in crude oil prices have reignited worries that these companies could see their profits drop in the final quarter of the year.
Shares of Royal Caribbean fell 3.1% on Friday, while Carnival Corp. and Viking Holdings dropped 3.6% and 2.9%, respectively. Meanwhile, the S&P 500 dipped 0.2%.
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