We came across a bullish thesis on Norwegian Cruise Line Holdings Ltd. (NCLH) on Substack by William Fleming-Daniels. In this article, we will summarize the bulls’ thesis on NCLH. Norwegian Cruise Line Holdings Ltd. (NCLH)'s share was trading at $16.38 as of April 17^th. NCLH’s trailing and forward P/E were 8.67 and 7.87 respectively according to Yahoo Finance.

A luxurious cruise ship sailing the deep blue sea, sun glistening off its decks.

Norwegian Cruise Line Holdings (NCLH) represents a compelling yet high-risk investment opportunity currently trading around $16.09 per share, with an equity valuation of $8.3 billion and an enterprise value of approximately $21.3 billion driven by its significant $12.9 billion net debt. In fiscal 2024, NCLH delivered robust performance, generating $9.48 billion in revenue—an 11% year-over-year increase—and achieving $2.44 billion in adjusted EBITDA, with 2025 guidance projecting further growth to $2.72 billion. The company expects $2.05 in adjusted EPS for 2025, indicating progress in its operational recovery. At 7.8x EV/EBITDA, NCLH trades below Royal Caribbean’s 11x and in line with Carnival’s 7x, highlighting both its discount and the market’s cautious view of its debt profile and macro sensitivity.

A critical aspect of NCLH’s outlook hinges on occupancy rates and operating costs. With 2025 occupancy projected at 103%, management has outlined sensitivities where each 1% change in occupancy equates to a $0.14 EPS swing. Fuel and interest rate fluctuations add further volatility, with a 10% fuel cost shift impacting EPS by $0.06 and a 1-point interest rate rise adding $8 million in expense. Despite refinancing $1.8 billion of debt, capital expenditure demands of $2–$2.5 billion per year through 2027 will sustain elevated leverage, making debt reduction a key priority.

Looking ahead, the investment thesis for NCLH is shaped by three scenarios. In the bear case, a mild recession coupled with reduced occupancy and yields would compress EPS to $0.80 and imply a $6 share price—this scenario has a 25% probability. The base case, with a 50% likelihood, anticipates a soft economic landing and stable demand, supporting guidance-aligned EPS of $2.05 and a fair value of $18–$19 per share using a 9x earnings multiple. The bull case assumes stronger demand, 105% occupancy, 5% yield gains, and faster deleveraging, driving EPS to $2.80 and potentially rerating shares to $36–$37 on a 13x multiple, also assigned a 25% chance.

Blending these scenarios yields a probability-weighted fair value of $20 per share, implying a 24% upside from current levels. However, the stock’s appeal is tempered by inherent risks such as high fixed costs, persistent debt, regulatory headwinds, and macroeconomic exposure. For investors willing to accept volatility in exchange for asymmetric upside potential, NCLH offers a speculative but intriguing value proposition in the post-COVID recovery phase of global leisure travel.

Norwegian Cruise Line Holdings Ltd. (NCLH) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 58 hedge fund portfolios held NCLH at the end of the fourth quarter which was 33 in the previous quarter. While we acknowledge the risk and potential of NCLH as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NCLH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.