Sail Panel Paints a Bleak Picture for Norwegian Cruise Line Stock

It’s hard to even imagine taking a cruise during the novel coronavirus pandemic. The longer that we go without a vaccine, the harder it is for equities such as Norwegian Cruise Lines (NYSE:NCLH) to gain any traction. That’s why Norwegian Cruise Line stock continues to suffer through 2020.

A Norwegian Cruise Lines (NCLH) ship in the ocean

Source: Roberto Sorin /

And now that the Healthy Sail Panel has come up with its recommendation about what cruising will look like when it resumes at some point this year or next, it’s even harder to envision having a lot of fun and relaxation once the cruise lines resume their journeys.

As difficult as this pandemic has been on the tourism and vacation industry, cruise line operators face a long, difficult recovery.

What Is the Healthy Sail Panel?

The Healthy Sail Panel is a group of scientific and medical experts who have been working since June to come up with guidelines to suggest to the Centers for Disease Control and Prevention (CDC) on how to safely operate cruises during the Covid-19 pandemic.

The panel was formed by Norwegian and one of its competitors, Royal Caribbean Group (NYSE:RCL), after the CDC announced it was seeking public comment on how to resume passenger cruises. The panel’s 65-page report was posted to Royal Caribbean’s and Norwegian’s websites on Sept. 21, the day the public comment period closed.

In the report, the panel makes 74 recommendations covering everything from testing of passengers and crew, sanitation, ventilation and contact tracing.

The panel suggests that passengers and crew be required to wear personal protective equipment and have daily temperature checks, that passengers not be allowed to disembark except for ship-sponsored excursions, that cruises have shorter itineraries and that the number of crew and passengers on board be limited.

Crew members should be required to have a negative test before leaving their home and also be quarantined on board for seven days before beginning work. Passengers should be required to pass a Covid-19 test before boarding as well.

The panel was led by Scott Gottlieb, a former commissioner of the Food and Drug Administration, and Gov. Mike Leavitt, a former secretary of Health and Human Services and former governor of Utah.

Leavitt said:

“This Panel undertook an ambitious, cross-disciplinary, public health examination to develop standards and guidelines that create the highest level of safety in the complex environment of a cruise ship. We studied the industry’s experiences combating the pandemic – and we then incorporated the many lessons learned and advances made by medicine and science over the past six months. The Panel’s recommendations are grounded in the best scientific and medical information available and are intended to meaningfully mitigate public health risks to those who sail.”

Does This Sound Like a Vacation?

While it’s unclear how much of the panel’s recommendations will be implemented by the CDC, the scenarios described in the report aren’t encouraging.

Will passengers think it’s worthwhile to spend thousands of dollars on a cruise just to wear PPE while lounging poolside? It’s not as if passengers will be living in an NBA-style protective bubble — every time the ship stops at a port and people disembark, the risk of Covid-19 transmission increases.

Gottlieb, for one, is confident that cruise lines can make a bubble. “We believe you can create a bubble around this experience, where you put in place enough controls that you dramatically reduce the risk of introduction, and if you do have a single introduction, dramatically reduce further spread on the ship … We have an environment that we can tightly control.”

That just seems like wishful thinking, at best.

Norwegian Cruise Line Stock at a Glance

Norwegian stock is down more than 70% so far this year, falling from nearly $60 per share to just more than $16.

Earnings continue to be exceptionally weak as the company’s ships are stock in port during a no-sail order. In the second quarter, Norwegian Cruise Line stock sustained an adjusted loss of $2.78 per share, which was worse even than analysts’ expectations of a loss of $2.16 per share. Revenues of $16.9 million were down 99% on a year-over-year basis.

The company reported having cash and cash equivalents of $2.3 billion, and $10.3 billion in long-term debt. The company said it is burning an average of $160 million per month.

None of these numbers are going to improve substantially until Norwegian and its competitors start cruising again. And none of that is going to happen, at least safely, until there’s one or more approved vaccines for Covid-19 that are widely available.

The Bottom Line

For now, NCLH stock doesn’t seem like a smart play. There will be little opportunity for sales growth until ships are back in the water and vaccines are on the market.

Until that happens, this company is just going to continue to burn through its cash.

The waiting game isn’t worth it for investors. NCLH stock has a “D” grade and a sell recommendation in my Portfolio Grader right now.

On the date of publication, Louis Navellier did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The InvestorPlace Research Staff member primarily responsible for this article was long RCL.

Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.

Article printed from InvestorPlace Media,

©2021 InvestorPlace Media, LLC