Shares of Norwegian Cruise Line Holdings Ltd. NCLH have rallied 53.2% in the past six months compared with the Zacks Leisure and Recreation Services industry’s 20.4% rise. Over the same timeframe, the stock has outperformed the S&P 500’s growth of 11.3%.

The company’s performance has been fueled by is benefiting from strong consumer demand and a solid booking environment. Also, the rise in onboard spending, boosted by shore excursions and improved communication offerings via Starlink high-speed Internet bode well. With record booking trends extending into 2025, NCLH’s commitment to delivering exceptional vacation experiences and executing its “Charting the Course” strategy lays a solid foundation for continued success.

6-Months NCLH Stock Price Performance

Image Source: Zacks Investment Research

Technical indicators suggest a continued strong performance for NCLH. The stock is trading above its 50 and 200-day moving average, signaling robust upward momentum and price stability.

NCLH Stock Trades Above 50 & 200-Day Moving Averages

Image Source: Zacks Investment Research

As of yesterday, Norwegian Cruise stock is hovering near its 52-week high of $28.64 (attained on Dec. 2, 2024). So, should investors pour more capital into NCLH now? Let us take a closer look.

Key Drivers of Norwegian Cruise’s Growth

NCLH’s performance continues to be buoyed by strong demand across all geographies, particularly in high-demand regions like Alaska, Canada and New England. In the third quarter of 2024, the company reported 9% year-over-year growth in net yield, driven by robust demand and pricing power. This growth is further supported by the company’s ability to deliver higher onboard revenues, particularly from shore excursions and enhanced communication services.

The company’s focus on premium offerings and expanding luxury services is paying off. NCLH’s investment in high-end suites, exclusive dining options and VIP experiences continues to resonate with affluent travelers, helping to drive higher margins.

Bookings for 2025 are showing continued strength, with occupancy rates and pricing in line with or above current levels. Advanced ticket sales have grown 6% year over year, outpacing capacity growth and reflecting solid consumer confidence in cruising as a preferred vacation choice. This growing confidence and the ability to maintain pricing power are expected to contribute to strong earnings and further growth in the coming quarters.

NCLH’s ongoing global expansion, particularly in Asia and Europe, is enhancing its reach and broadening its market opportunities. The introduction of new, diverse itineraries and exclusive experiences is opening up new revenue streams, while the company’s focus on sustainability and eco-friendly ships is appealing to environmentally-conscious travelers, boosting its brand appeal.

NCLH’s Challenges to Watch

Norwegian Cruise faces headwinds from inflation and increasing operational expenses. During the third quarter of 2024, total cruise operating expenses were $1.54 billion, up from $1.48 billion reported in the year-ago quarter. The company reported a rise in commissions, transportation, onboard and other expenses. It anticipates inflation and global supply chain constraints to pressurize margins in the near term. Also, it is cautious of increased expenses in terms of fuel and capacity additions.

NCLH has significant exposure to currency fluctuations due to its shipbuilding contracts. As of Sept. 30, 2024, the company’s future ship construction obligations totaled $18.7 billion, up from $6 billion at the end of 2023. A 10% change in the euro-to-dollar exchange rate could result in a $1.9 billion fluctuation in the dollar value of these obligations, impacting capital expenditure planning and financial flexibility.

Geopolitical tensions and regional conflicts continue to pose risks for cruise itineraries. During the third quarter of 2024, NCLH adjusted routes in response to disruptions in the Middle East, comprising about 10% of its fourth quarter of 2024 deployment. Future geopolitical instability could impact demand and necessitate further itinerary changes, potentially affecting revenue.

NCLH’s Valuation: An Attractive Opportunity?

Norwegian Cruise — sharing space with Royal Caribbean Cruises Ltd. RCL, Carnival Corporation & plc CCL and OneSpaWorld Holdings Limited OSW — is trading at a discount. NCLH is currently trading at a forward 12-month price-to-sales (P/S) multiple of 1.21X, well below the industry average of 2.37X, reflecting an attractive investment opportunity.

Image Source: Zacks Investment Research

The Zacks Consensus Estimate for NCLH’s 2025 earnings per share has moved up 1% in the past 60 days. The upward revision in earnings estimates indicates analysts’ increasing confidence in the stock.

Image Source: Zacks Investment Research

NCLH’s Investment Verdict: Hold for Now

Norwegian Cruise is well-positioned for long-term growth, supported by strong consumer demand, record booking trends, and its strategic focus on premium offerings and global expansion. The company’s ability to drive higher onboard revenues, maintain pricing power, and execute its “Charting the Course” strategy provides a solid foundation for continued success.

However, challenges such as rising operational expenses, currency fluctuations and geopolitical risks could impact near-term performance. The company remains cautious about increased costs related to fuel, capacity additions and supply chain constraints, which may weigh on margins.

While NCLH’s strengths and attractive valuation present a compelling investment opportunity, external risks prevail. The stock’s exposure to macroeconomic uncertainties and potential itinerary disruptions calls for evaluation before making new investment decisions. For current shareholders, holding onto this Zacks Rank #3 (Hold) stock may be a prudent choice, given its solid long-term growth prospects.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Carnival Corporation (CCL) : Free Stock Analysis Report

Royal Caribbean Cruises Ltd. (RCL) : Free Stock Analysis Report

Norwegian Cruise Line Holdings Ltd. (NCLH) : Free Stock Analysis Report

OneSpaWorld Holdings Limited (OSW) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research