Several prominent firms on Wall Street initiated research coverage on Viking Holdings (VIK) this week, nearly a month after the luxury cruise operator went public via an initial public offering (IPO).
The stock rose 1% on Tuesday and around 15% since its debut.
JPMorgan initiated coverage of VIK with an Overweight rating and a $34 price target set for December 2024.
“We see VIK well-positioned to gain multi-year market share within the expanding $1.9T global vacation market driven by: (i) insulated target demographic of 55+ year-olds, (ii) destination-focus (= no yield cannibalization & cost efficiencies), and (iii) scalable business model with a strong foundation,” analysts said in a note.
The firm also emphasized Viking's educational marketing strategy and high customer loyalty, noting past guests account for over 60% of bookings for new offerings and a guest repeat rate of approximately 51%.
UBS also commenced coverage on Viking Holdings with a Buy rating and a price target of $35.
Analysts pointed out VIK’s unique position as a pure luxury travel play with a robust balance sheet and high return on invested capital (ROIC), which are critical in the capital-intensive cruise industry. Viking's scarcity value, appealing to investors interested in luxury consumer experiences, was also highlighted.
“Viking doesn’t always grow pricing at a higher rate than the other publicly traded cruise lines, but its absolute dollar yield is much higher, and a higher end consumer could be more likely to hold up better than the broader market consumer in a downturn,” analysts said.
Morgan Stanley, however, took a more measured stance, initiating coverage with an Equal-weight rating and forecasting approximately an 8% upside to their 12-month price target.
Morgan Stanley recognized Viking's focus on the premium and luxury consumer segments, smaller fleet size, and a leading position in the River cruise market as factors that drive higher net yields and ROIC compared to peers. The company's leading capacity and EBITDA growth were noted as well.
However, analysts suggested that the stock's premium valuation might already reflect these advantages.
VIK is currently rated Buy by six investment firms, while two rated it Neutral.