Can Cruise Line Stocks Recover From The Coronavirus?
As the global travel industry remains mostly shut down, the cruise line industry remains one of the hardest hit. Uncertainty has beaten down the stock price of all three major cruise lines in the US. There are, however, some signs of hope as future cruise bookings are still coming in despite the ongoing pandemic. Most cruise stocks took a dive since March and have never had the ability to rebound sustainably. When the coronavirus swept through parts of Asia, the Diamond Princess cruise ship was badly hit with the number of positive cases and numerous deaths among its passengers.
According to TD Ameritrade’s JJ Kinahan, millenials have been adding cruise line stocks to their portfolio. Millennials seem to have a longer horizon compared to seasoned investors. Their moves may not appear to be such a good idea and really unconventional. But then again, if we look at a longer term, these strategies might actually work. After all, cruise line stocks have never been this low, and what if these millennials were right?
Cruise line stocks have spiked by double digits on May 18 due to optimism over a potential Covid-19 vaccine candidate. The hopes of reopening the economy sooner than expected and potential vaccine news sent some cruise stocks soaring again. But investors shall remain cautious as vaccine development is still in a pretty early stage. No vaccine is proven safe and effective at the moment. Meaning, the cruise industry still faces significant operational hurdles if it hopes to begin operations later this summer. That said, let’s take a closer look at three major cruise stocks in the US to see if they are worth adding to your portfolio.
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Cruise Line Stocks To Buy Or Sell: Norwegian Cruise Line Holdings
If you’re giving up completely on buying into the cruise industry, you’re not alone. Norwegian Cruise Line Holdings (NCLH Stock Report) has seen its shares plummet as Covid-19 ravages the travel industry. However, NCLH stock has rebounded from its all-time low, but uncertainty is still dominating the outlook.
On May 14, the largest cruise operator carried out a rather unusual conference call. There were virtually no reports on yield growth or net cruise costs, whatsoever. Their focus was rather on liquidity measures taken to get the company to weather through the Covid-19 storm. Norwegian Cruise is cruising on calmer seas as the company may defer approximately $540 million of total debt amortization payments through March 31, 2021. That would help ease some financial pressure when there’s no revenue coming in the near term. The company has raised over $3 billion funding led by Goldman Sachs. This will put the company in a good position to last 18 months in a zero revenue environment.
Shares of Norwegian Cruise Line have plummeted 73% year to date. From the all-time low of $7.7 per share, the stock has climbed more than 100% in the past two months. The recovery of the cruise line business to pre-pandemic levels could take up to a few quarters, if not a few years. However, the actions taken by the management have been steering the company to a higher chance of successful recovery and future growth. With that in mind, would NCLH stock be a good buy now?
Cruise Line Stocks To Buy Or Sell: Carnival
Carnival (CCL Stock Report) also saw its share price plummet 81% during the stock market crash in March. Since hitting rock bottom of $7.97, the stock has jumped upwards by one fold. With the recovery, the stock is down 64% since the start of the year. Could Carnival be a good buy now before the stock makes another big move?
It’s important to note that a 50% loss requires a 100% gain in order to break even. Since Carnival lost approximately around 70% after the market crash, the share price will have to climb 233% to reach its pre-crash levels. For prospective long term investors, with positive signs arising from the tourism industry, it’s reasonable to assume that Carnival’s rally could continue. Could this be an attractive opportunity to benefit from some serious long-term gains by investing in CCL stock today?
Cruise Line Stocks To Buy Or Sell: Royal Caribbean
Lastly, Royal Caribbean (RCL Stock Report) is the most appealing cruise stock to have in the battered cruise line industry. Wall Street analysts love this stock the most compared to the other two cruise stocks on the list. The reason could be because Royal Caribbean appeared to be the strongest cruise ship business in the quarters preceding the Covid-19 pandemic. This is thanks to its focus on customer satisfaction and on creating novel experiences like its exclusive island resorts. This allowed the company to attain better pricing and occupancy trends than the other major cruise companies.
RCL stock has plummeted more than 60% this year. Since reaching its 6 months low, the company has rebounded more than 130% and is currently trading at $51.87 per share. Investors who are optimistic enough to believe the cruise industry will sail through Covid-19 might want to consider companies with the more promising business plans. But they should lower their expectations if they were hoping for a quick rebound in the short term. With that in mind, would RCL stock be the best cruise stock to have compared to Norwegian Cruise and Carnival?
