Whether you love it or hate it, setting sail on a cruise is undeniably a favorite vacation option for many travelers. Cruise stocks are equally polarizing and, like many travel stocks, tend to be better trades than long-term investments. However, as data points show that consumer spending is slowing down, is this a time to look for cruise stocks to buy on the dip?
Something for you to keep in mind as you make that decision is that cruises are often booked several months in advance. That means the vacation pictures you may see on social media in the months to represent sunken costs that may bear little reality to the current economic news. And the cruise lines cite solid booking levels well into 2025.
With that in mind, many cruise lines will likely post strong numbers independent of what happens in the broader economy. Here are three cruise stocks to buy on the dip.
Carnival (CCL)
Carnival (NYSE:CCL) is getting a lot of attention as one of the cruise stocks to buy on the dip. High expectations are being placed on its June 25, 2024 earnings report. Investors will be looking to see if the company can keep reporting revenue that is not only higher year over year but also higher than 2019 levels.
Investors need to see that because Carnival took on perhaps the highest debt burdens of the cruise lines. Companies do not like to be leading in that category, particularly in the travel industry.
That debt is still likely to weigh on earnings for some time. However, the company reported a record level of bookings at considerably higher prices, which is one reason the company was able to pay down approximately $8 billion of debt during the quarter.
That’s the kind of progress that has analysts bullish on CCL stock. The consensus price target of $20.99 is 30% higher than the June 21, 2024 closing price.
Viking Holdings (VIK)
One investment strategy is not to fight what the market clearly gives you. To amplify this, I present Viking Holdings (NYSE:VIK). This is a newcomer to the market; it’s only been publicly trading since May 1, 2024, and is already up about 20%. However, the stock has dropped about 10% in the five days of trading ending June 21, 2024.
Viking’s business model caters to the affluent and childless travelers who want to make the destination and not the ship the primary reason for traveling. Cruise ships don’t permit passengers under 18 and don’t have onboard casinos. The company’s target audience is over 55 years of age.
It’s not for everyone. And if you call this a cynical play on a bifurcated economy, I won’t debate it much. However, this demographic is least impacted by inflation today and will likely have disposable income to partake of the “modern luxury” Viking offers.
The current valuation is high. But with only one earnings report, it’s too early to make any long-term judgments on VIK stock.
Norwegian Cruise Line Holdings (NCLH)
Demographics are also a reason to look at Norwegian Cruise Line Holdings (NYSE:NLCH) as one of the cruise stocks to buy on the dip. NLCH stock is down about 13% in 2024, but analysts have a consensus Buy rating on the stock with an upside of about 20%.
Like Viking, Norwegian has its share of high-net-worth cruisers. However, the company is also capturing another coveted demographic. According to Norwegian Chief Executive Officer (CEO) Harry Sommer, millennial and Gen-Z consumers are the fastest-growing segment of the company’s business. That’s particularly important because, unlike Carnival, Norwegian is not a budget-friendly option.
That does raise questions about how much a weaker consumer will impact the company. In its most recent earnings report, the company had a slight revenue miss but still came in much higher on a year-over-year basis. As the company adds capacity to its new fleet, it expects to grow at a compound annual growth rate (CAGR) of around 6% through 2028.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
