Cruise stocks had their fair share of hardships at the outbreak of the pandemic. Vessels docked at ports for months on end and extended no-sail orders became commonplace.
While cruise lines are unlikely to sail the high seas anytime soon, I wouldn’t write off the industry completely. For investors who believe patience is a virtue, there are gains to be made in this sector once the pandemic is behind us.
At the very least these stocks are a major bargain at their current price. Investors looking for a strong rebound play this year will find these cruise companies a great buy.
- Norwegian Cruise Line Holdings (NYSE:NCLH)
- Royal Caribbean Cruises (NYSE:RCL)
- Carnival Corp (NYSE:CCL)
Cruise Stocks: Norwegian Cruise Line Holdings (NCLH)
As one of the major cruise lines in the U.S., Norwegian was among the hardest-hit companies during the pandemic.
Shares of the company dipped 50% in 2020 as it burned through large amounts of cash each month.
With sailings canceled through April 2021, a short-term turnaround is not in the cards. But, while Norwegian may seem like a bad investment at face value, it has actually managed to weather the Covid storm.
Investors in the bear camp will write off NCLH stock citing its lost valuation. If you take a closer look at the numbers, though, the situation isn’t as grim as it seems. Norwegian’s share price is down significantly, but the company has also issued new shares and taken on debt.
According to this Motley Fool article, this means that Norwegian’s enterprise value has only dipped by 10% from $18.3 billion to $16.6 billion. For an industry that saw zero activity this year, this number isn’t too bad. Shares of the cruise stock were also up 6.63% on Tuesday over renewed optimism of the vaccine rollout.
Royal Caribbean Cruises (RCL)
Just like Norwegian Cruise Lines, Royal Caribbean was battered by the pandemic. Since the start of the year, the company has lost about 10% of its valuation as a new strain of the virus sweeps across Europe.
For its upcoming earnings, Seeking Alpha estimates a loss per share of $5.19 and revenue of $42.86 million. While the numbers aren’t great, there is still reason to remain optimistic about the cruise stock’s comeback.
A major reason for this is the imminent return of travel. As mentioned earlier, the turnaround time for this is uncertain but cruise stocks like this one are worth betting on for better times ahead. With the vaccine rollout underway (albeit slower than expected), travel could be back to normal soon.
As for the no-sail orders that are still in place, they could potentially be lifted with proof of vaccination by the passengers on-board. It is unlikely that this will happen in the near future but the very fact that this is a possibility at some point, makes this Royal Caribbean a bargain-buy right now.
Cruise Stocks to Buy: Carnival Corp (CCL)
A third cruise line that continues to remain docked as the pandemic rages on is Carnival. With its stock down 57% this year, there is good reason to hold off on CCL stock right now.
However, the company does have a few tailwinds to look forward to when life returns to normal. For one, Carnival reported that the number of bookings for the 2022 season was higher than those in 2019. Adding to this, nearly 60% of the bookings were from new customers. This hints at pent-up demand for cruises in the future.
Carnival’s financial position isn’t too bad either. Even if the company sees little to no sailing activity this year (a very likely scenario), the company’s CEO remains confident that they can push through.
This confidence stems from the $9.5 billion cash balance on the books. Carnival could raise additional funding this year if required.
While this value seems optimistic, long-term debt has also increased to $22.1 billion from approximately $10 billion in 2019. Nevertheless, the cruise stock does trade on the cheap.
In my previous article on Carnival stock, I mentioned that it is not a strong buy right now. While I still stand by this, the cruise line is still a great bargain play for investors who are in it for the long-haul.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.