The cruise line sector has taken quite the beating at the hands of the Covid-19 pandemic. Cruise ships were docked for the better part of the past couple of years, with travel and other social-distancing measures in place.
Moreover, after December, omicron compelled the Centers for Disease Control and Prevention (CDC) to raise its warning for cruise ships to its peak level. After a rough couple of years, cruise operators are optimistic about their prospects, which has investors searching for the best cruise stocks again.
The sector has bounced back well, with a few cruise lines returning to full fleets and anticipating massive bookings ahead. Market research firm Statista predicts that the industry could reach a whopping $57 billion in sales by 2027. Hence, despite the current macro-economic crisis, there’s much to be excited about with cruise line stocks over the long term.
| CCL | Carnival Corporation | $8.64 |
| RCL | Royal Caribbean Group | $34.38 |
| NCLH | Norwegian Cruise Lines | $11.02 |
| LIND | Lindblad Expeditions Holdings | $7.99 |
| CRUZ | Defiance Hotel, Airline, and Cruise ETF | $15.02 |
| OSW | OneSpaWorld | $7.09 |
| DIS | Disney | $94.58 |
Carnival Corporation (CCL)
Shares of British-American cruise operator Carnival Corporation (NYSE:CCL), have taken a bludgeoning at the hands of the stock market.
CCL stock has tanked over 60% in the past year, amidst the challenging market conditions. It continued to burn through $2 billion each quarter throughout the pandemic.
As per its most recent filing, it has $36.23 million in total debt, which represents a colossal increase from the $14.43 billion in debt it carried during the pre-pandemic era. The company balance sheet remains in dire straits with the limited financial cushioning. Debt repayments this year amount to $1.57 billion, while the pace is likely to increase in the coming years. Though you’d a expect a pull-back in sales and profitability
Royal Caribbean Group (RCL)
Royal Caribbean Group (NYSE:RCL) is a Liberian-American cruise giant that has taken a hammering over the past couple of years.
With its ships docked at port, it burned through its cash reserves and shored up heaps of debt to stay afloat. Moreover, it has been diluting equity to support its financial flexibility. It has dug up a ditch that will take a lot to get out of in the coming years.
RCL’s 3-year long-term debt change is at 165%, a testament to how financially stressed the business has become. With no cash-generating ability for the past couple of years, it has been forced to take up debt and issue new equity at an alarming pace.
From July 09, 2020, to May 02, 2022, the outstanding share count has risen by 18.8%. Even if revenues return to pre-pandemic levels, things will likely be remarkably challenging over the next several years.
Norwegian Cruise Lines (NCLH)
Norwegian Cruise Lines (NYSE:NCLH) is part of the trifecta of top cruise line operators. Like its peers, it has reeled under the weight of its losses and high debt levels.
Its liquidity ratios have suffered immensely, but the enterprise has done incredibly well in raising cash. Nevertheless, its debt position stands at a gigantic $13.6 billion, with just $3.1 billion in liquidity.
It recently reported considerable growth in revenues during its first quarter, but operating expenses played spoilsport. Higher wages, logistics, direct costs, fuel costs, and other related expenses have led to a 266.1% increase in operational costs. Though many of these expenses were incurred due to the resumption of voyages, the macro-economic environment at this time isn’t doing NCLH any favors.
Lindblad Expeditions Holdings (LIND)
Lindblad Expeditions Holdings (NASDAQ:LIND) is a specialty cruise operator that delivers voyages through its fleet of expedition ships that cater to remote wilderness and ecological tourism.
Trip prices can cost around $5,000 to $25,000, depending on the itinerary. The pandemic was particularly hard on discretionary stocks such as LIND stock, so its prices dropped at a staggering pace. Lindblad targets the more affluent consumers, but despite its niche-centric approach, it is an obvious sell at this point.
Inflation has the U.S. and other parts of the world reeling, and it’s hard to foresee a scenario where consumers would spend thousands of dollars on a specialty cruise trip. Moreover, turning a profit has been incredibly hard for the business, generating negative earnings per share from the first quarter of 2020.
Defiance Hotel, Airline, and Cruise ETF (CRUZ)
Investing in exchange-traded funds has been one of the most popular investing strategies. It essentially eliminates the need for a fund manager, with investors placing their bets on a wide variety of stocks with a single investment.
Hence, investors looking to place their bets on a dedicated cruise line and travel ETF, they should look no further than Defiance Hotel, Airline, and Cruise ETF (NYSEARCA:CRUZ)
CRUZ offers a relatively low expense ratio of 0.45, with exposure to some of the leading names in the cruise line sector. Considering the market situation, would it be wise to invest in such risky bets? Certainly, the risk outweighs the rewards at this stage.
OneSpaWorld (OSW)
OneSpaWorld (NASDAQ:OSW) operates a unique business in the cruise line niche that offers its guests a suite of health and wellness services on cruise ships belonging to the biggest names in the sector.
Services include beauty, fitness, wellness, and other treatments, which the company carefully curates. Its products and services are offered on 172 cruise ships across 66 destinations. OneSpa operates an asset-light model with access to a massive captive audience.
Despite the attractiveness of its business model, it is yet to break even. Moreover, though the company seems like a more tempting bet at this point, its success is linked to the cruise line industry, which will be under duress for the foreseeable future.
Disney (DIS)
Disney (NYSE:DIS) is a highly diversified entertainment giant that is a household name at this point. It performed incredibly over the past several years, with a solid track record of growing revenues and profits.
Though it’s experienced healthy across all its segments, the direct-to-consumer business has attracted the most eyeballs. Disney+ and other streaming services have proven to be extremely popular in the past couple of years.
Moreover, with the economy worsening, consumers are likely to put off a Disney cruise or a trip to one of its resorts rather than foregoing its $13.99 a month streaming bundle. Though it plans to expand its cruise line business with three additional ships this year, you probably want to avoid it purely for its cruise line business.