Cruise stocks suffered the most due to the novel coronavirus pandemic in 2020. With the advent of the new year, many were hoping for some much-needed respite. However, cruise stocks remain depressed well into 2021.
Unfortunately, the pandemic is not helping matters. President Joe Biden said that it would be difficult for the United States to reach herd immunity by the end of this summer.
So, we are looking at a prolonged recovery. Cruise lines know that, and that’s why they focus on shoring up their balance sheets and reducing costs. However, that is not the only thing that they are doing.
Many companies have made some notable changes in preparing for the economy to restart and cruise lines to retake the seas. However, Patrick Scholes, an analyst at Truist Securities, thinks that July could be the best time for cruises to resume, though late 2021 is more likely. Revenue estimates, at least, point to 2021 being the year of recovery.
Here are three cruise stocks that are looking forward to brighter days.
Cruise Stocks: Carnival (CCL)
Carnival is the largest cruise vacation company in the world. Once the novel coronavirus pandemic is firmly in our rearview mirror, it will bring 88 ships to the sea. Carnival recently launched private offerings of $3.5 billion of 5.75% senior unsecured notes due 2027.
It marks another expensive capital raise for the cruise line. My colleague, InvestorPlace‘s Faisal Humayun, wrote an excellent article on the top three cruise stocks’ debt situation. The company reported $24.9 billion in debt in August, and its credit rating was downgraded by Moody’s and S&P in March.
Humayun believes that the company has the wherewithal to handle the crisis. However, with $4.2 billion in debt refinancing due in the next 24 months, it will be a long and arduous road to recovery.
Expectations are for revenues to rise 13.6% and 227.4% in fiscal 2021 and 2022, respectively. But all of these estimates are subject to revision. Additionally, it will take time to vaccinate the global population. I guess that’s why the 12-month price target is $18.20, a 12.2% downside to the current stock price.
Royal Caribbean (RCL)
Royal Caribbean is the world’s second-largest cruise company, operating more than 60 ships spread across various brands and platforms. Like several other cruise lines, the company hasn’t been doing well as of late.
However, at least the company is proactive. Recently, an email was circulated among the crew members to inform them that Royal Caribbean expects to vaccinate its crew once sailings restart.
The company also recently announced its Singapore season’s extension with Quantum of the Seas until June 2021. Since December, under stringent measures, the cruise line has been operating in the region.
Still, the pain will take time to subside. In the last three quarters, RCL has disappointed analyst expectations. Unsurprisingly, out of 17 analysts covering the RCL stock, only six have a bullish view. The 12-month price target is a bit more optimistic at $70.10 a pop, a 3% upside to the current price.
Norwegian Cruise Line (NCLH)
Norwegian Cruise Line and its Regent Seven Seas Cruises brand will be asking all of its crew members to receive the vaccine before boarding its vessels. “We are exploring all options regarding vaccinations for guests and crew, and we intend that all crew members be vaccinated before boarding our vessels to begin their duties, subject to availability of the vaccine,” Norwegian and Regent Seven Seas’ statements read.
Much like the other members of this list, NCLH has had a tough time as of late. In the last three quarters, the company delivered consecutive negative earnings surprises. In its latest earnings release, Norwegian Cruise Line reported a monthly average cash burn rate for the third quarter of approximately $150 million. Delivering a pessimistic outlook, the company said that the fourth quarter average cash burn rate would be nearly $175 million per month.
Analyst estimates have revenues falling 80.3% and 67.8% in fiscal 2020 and 2021, respectively. Out of 16 analysts covering the company, only six have a bullish view.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.
