Steiner Leisure (STNR -14.8%) shares plunged in morning trading after the company disclosed that its agreement with Celebrity Cruises will not be renewed upon expiration at the end of the year.
Management expects the termination to reduce EPS by no greater than $0.24/share.
Stifel Nicolaus's Steven Wieczynski reiterated a Buy rating with a $68 PT with the view that the shares' decline is a buying opportunity. He notes that the market is pricing in additional contract losses even though the company does not have major contracts coming up for renewal in the near-term with the exception of Norwegian, which is set to expire at the end of 2014. At a 2014E PE of 15.2 as of yesterday's close, the worst-case scenario EPS hit would shave off $3.65 from shares vs. the current $8.57 drop.
Also allaying concern: the company has described its talks with Norwegian as constructive and has been diversifying its revenue, Wieczynski notes.