When it rains, it pours. Or in Viking Holdings' case, just the opposite.

Viking has been on a tear since its May 2024 initial public offering. Its adult-only cruises are popular with well-heeled travelers, and the company has successfully expanded beyond its core European river cruise business, with more routes in areas like North America and ocean voyages from pole to pole. Its stock has nearly doubled since Barron's highlighted its growth potential last year.

However, Viking shares have sold off since the company's August earnings report. The results themselves showed strong ongoing demand, but also included the impact of low water levels in Viking's key Rhine-Danube river corridor. The European river cruises it's best known for are still its bread and butter, meaning low rainfall can have a big impact on profits.

Nor is this a run-of-the-mill drought.

"Current water levels along the Rhine-Danube corridor represent a severe and historically unprecedented event," writes Citi analyst James Hardiman in a note Wednesday. At the end of August, eight stations in the region were stuck around the bottom 0% to 3% of all historical readings for this point in the calendar year, he notes, "with Budapest at or within a hair of its all-time recorded lows for the month."

That means large stretches of one of Viking's most popular regions have been disrupted, with the company saying that more than half of its third-quarter river passenger cruise days (a metric it uses to capture capacity) were impacted. Hardiman estimates that could mean between $30 million and $50 million in lost revenue and a $150 million overhang from future cruise vouchers.

"Put simply, Viking finds itself navigating the most severe European river water level event in company history at a moment when the company had otherwise been delivering some of the strongest fundamental momentum in the leisure and travel sector, and investors across a broad range of strategies had shown a growing interest in the Viking narrative," Hardiman writes.

It also comes just after longtime CEO Torstein Hagen stepped down from the role, with veteran Leah Talactac taking his place at the helm, and when cruise companies of all stripes are dealing with higher oil prices.

The energy spike ushered in by the Iran War not only makes it costlier to sail ships, but leaves less room in consumers' budgets for discretionary purchases like travel. That's less of an issue for Viking's wealthier travelers, but tensions in the Middle East also further restrict where it can sail.

"The timing surrounding the resolution of this disruption and the ripple effects into 2027 and beyond will determine whether the current dislocation in the stock will prove to be a great buying opportunity (which so many of the potential investors on the name with whom we speak have been waiting for) or a value trap," Hardiman writes.

"With a long history of destabilizing events in the cruise industry to fall back on, we clearly land in the former camp, but it is nonetheless difficult for investors to look through such an event until they can wrap their heads around its duration and, secondarily, its estimated impact."

He has a Buy rating and $113 price target on the shares, implying more than 30% upside from the $86 where Viking was recently trading.

He's not alone: More than 80% of the analysts tracked by FactSet are bullish on the stock, with an average price target of $111.

UBS analyst Robin Farley estimated last week that future cruise vouchers would amount to less than 1% of net yields in 2027 and 2028, given that they'll be spread across two years and Viking's capacity is growing by double digits.

"We believe the impact could be less than 70 basis points by our back-of-envelope calculations in 2027 and less than 60 basis points in 2028 since not every discount voucher may even be used, though we would expect the vast majority to be used- and that is if the water levels were to continue to disrupt at the same level until Sept 30." She has a $121 price target on the shares.

In short, Viking shares may be left high and dry until the rains return, but Wall Street thinks they could ultimately rise along with the water levels.