Royal Caribbean Cruise's shares have been given a boost, in part due to the Richard Fain-led company's recent investment in Silversea Cruises.
Deutsche Bank analyst Chris Woronka upgraded the stock to buy from hold and hiked the target price to $146 from $135 as cruise pulls more investors away from lodging, retail and Macau gaming.
"We also continue to find valuation undemanding, particularly since many sell-side models have yet to incorporate the Silversea investment into 2019 forecasts," he wrote in a note to clients.
The Miami-based company's shares gained 3% to $123.83 by today's mid-morning.
In June, Royal Caribbean said it would take a $1bn controlling stake in luxury and expedition cruiseship company Silversea Cruises.
Woronka said the company will probably exceed the $50m in forecast synergies.
Woronka's other reasons for the upgrade include Wall Street consensus on Royal Caribbean should "migrate higher" before third-quarter earnings emerge in November.
Royal Caribbean in early August posted adjusted second-quarter earnings of $482.2m, producing $2.27 earnings per share that beat analysts' estimates of $2.01.
Woronka also said Deutsche Bank feared capacity growth would hurt yields and cause cruise majors to re-rate their stocks but continued travel demand show full capacity use.
"The quality of the hardware continues to improve, and we believe there are meaningful levers to pull in terms of driving incremental, margin-rich onboard spend," he wrote.
