Truist analyst C. Patrick Scholes recently downgraded Norwegian Cruise Line Holdings Ltd., but his positive outlook on the stock suggests he is still optimistic about its future. In fact, his new stock price target surpasses that of most Wall Street bulls.

Scholes came to this conclusion after consulting with senior executives from prominent travel agencies specializing in cruises and thoroughly analyzing data on future bookings. Based on this information, he believes that the cruise industry is undeniably on a strong path to recovery.

However, Scholes did note that despite the exceptional performance of Norwegian’s stock over the past two months, he did not observe an additional surge in forward booking and pricing trends. This led him to lower his rating on Norwegian’s stock from buy to hold, a position he had maintained for the past 10 months.

As a result of Scholes’ downgrade, Norwegian’s stock experienced a 2.3% decline in premarket trading.

Scholes is not concerned about the recovery of cruise demand but rather questions how much of this recovery is already priced into the stock. After skyrocketing by 46.6% in June and reaching a 17-month closing high of $22.52 on July 10, the stock has since pulled back by 7.8% through Monday.

Even with this pullback, Norwegian’s stock remains up 69.6% year to date. In comparison, the Consumer Discretionary Select Sector SPDR exchange-traded fund has climbed 36.0%, while the S&P 500 index has advanced by 17.8%.

Despite downgrading Norwegian, Scholes increased his stock price target from $17 to $23, making it the second highest target among the 18 analysts surveyed by FactSet. The majority of analysts still maintain buy ratings for Norwegian.

In regards to Norwegian’s competitors, Scholes maintained his hold rating for Royal Caribbean Cruises Ltd. but reiterated his sell rating for Carnival Corp. He also raised his stock price targets for both companies, with Royal Caribbean’s target increasing to $115 from $72 and Carnival’s target rising to $16 from $11.

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