The vacation travel sector, which includes the cruise industry, suffered through a rough phase last year as cruise lines were docked for more than a year due to the COVID-19 pandemic and consequent travel restrictions. However, the easing of travel restrictions and cruise companies’ efforts to better serve their customers have helped the cruise industry rebound this year. Global revenue under the cruise segment is expected to grow at a 38.4% CAGR through2026.
The industry is expected to see a huge surge in bookings in 2022 and beyond. This is evidenced by Oceania’s world cruise for 2023, which was sold out within one day of opening for sale to the public. Also, river cruise operator Uniworld saw a 425% year-over-year increase in bookings to exotic destinations. According to a report by Cruise Industry News, there has been a fifteenfold year-over-year increase in ships that will be operating commercially this month.
Given this backdrop, we think it could be worth adding cruise stocks Carnival Corporation & plc (CCL) and Norwegian Cruise Line Holdings Ltd. (NCLH) to ones watchlist. Wall Street analysts expect them to rally by more than 55% in price in the near term.
Carnival Corporation & plc (CCL)
Incorporated in 1972, CCL in Miami, Fla., is a leisure travel company that provides vacations to travelers around the globe. Carnival Cruise Line, Princess Cruises, Holland America Line, and Costa Cruises are a few of the company’s portfolio of global cruise line brands. CCL operates 87 ships with 223,000 lower berths that visit approximately 700 ports.
This month, CCL launched a new marketing campaign, “Funderstruck”, under the company’s brand platform Choose Fun. Through Funderstruck, people can book and take vacations with America’s cruise line.
For its third fiscal quarter, ended August 31, 2021, CCL’s revenue increased 1,661.3% year-over-year to $546 million. The company’s operating loss declined 11.8% from its year-ago value to $2.06 billion. Its interest income was $3 million during the period. Also, the company’s cash and cash equivalents amounted to $7.15 billion.
CCL’s revenue increased 683.7% year-over-year to $15.08 billion in its fiscal 2022. Its EPS is expected to grow 97.4% next year.
Closing the last trading session at $17.57, the average analyst price target of $30 represents a 70.8% potential upside.
Norwegian Cruise Line Holdings Ltd. (NCLH)
Also based in Miami, Fla., NCLH is a global cruise company that operates the Norwegian Cruise Line, Oceania Cruises, and Regent Seven Seas Cruises brands in North America, Europe, the Asia-Pacific, and internationally. As of December 31, 2020, the company had 28 ships with approximately 59,150 berths.
This month, NCLH completed its nearly $200 million multi-year investment in exhaust gas cleaning systems (EGCS) on certain ships in its fleet with the successful commissioning of EGCS onboard Norwegian Breakaway and Norwegian Getaway. With the investment, NCLH completed installations on existing ships, and around 13 ships are now equipped with this innovative environmental technology.
During the third quarter, ended September 30, 2021, NCLH’s total revenues increased 2,248.6% year-over-year to $153.08 million. The company’s revenue under the passenger ticket segment grew 1,745.4% from its year-ago value to $86.13 million. And its cash and cash equivalents came in at $1.93 billion at the end of the period.
NCLH’s revenue is expected to increase 754% year-over-year to $6.18 billion in fiscal 2022. Its EPS is estimated to grow 100.8% next year.
The consensus price target of $30.57 represents a 58.1% potential gain from the last closing price of $19.34.
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CCL shares fell $17.57 (-100.00%) in premarket trading Friday. Year-to-date, CCL has declined -19.44%, versus a 24.76% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research. More...
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