Top Cruise Line Stocks for Q4 2022

The cruise line trade is a part of the broader journey and tourism trade, targeted totally on offering sea-based trip experiences. Corporations within the trade personal and function cruise ships in numerous locations worldwide, providing quite a lot of itineraries and themed cruises. In addition they might present different journey and trip companies. The massive cruise line firms embrace Carnival Corp. and Norwegian Cruise Line Holdings Ltd.

The cruise line trade has been severely affected by the COVID-19 pandemic, associated journey restrictions, and different social-distancing measures. Many cruise operators ceased ship operations for a lot of months all through the early portion of the pandemic. Now many traces have resumed nearly all of their cruise operations and bookings have soared in comparison with 2019, earlier than the pandemic. Nonetheless, extra points hamper the trade: cruise firms have struggled to rent again staff, which has led to cancellations and diminished on-board facilities.

All pure-play cruise line shares obtainable to U.S. traders are underperforming the broader market, having offered complete returns under the -12.1% complete return of the Russell 1000 Index over the previous 12 months. There isn’t a particular benchmark index for the cruise trade. The market efficiency quantity above and all statistics within the tables under are as of Oct. 4, 2022. Under, we take a look at the highest three cruise line shares with the most effective worth, quickest progress, and finest efficiency.

There are simply 4 pure-play cruise line firms simply obtainable to U.S. traders, however we take a look at them in our common model. As a result of all the trade has suffered losses in current quarters, the worth part under will likely be primarily based on price-to-sales ratio somewhat than the standard price-to-earnings ratio (P/E Ratio). Additionally, the income progress charges within the progress part additional under are abnormally excessive as a result of income in the newest quarter is being in comparison with extraordinarily low baseline ranges within the year-ago quarter on account of COVID-19 restrictions. Even comparatively small absolute worth modifications in income have resulted in monumental proportion modifications.

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These are the cruise line shares with the bottom 12-month trailing price-to-sales (P/S) ratio. For firms in early phases of growth or industries affected by main shocks, this may be substituted as a tough measure of a enterprise’s worth. A enterprise with greater gross sales may finally produce extra revenue when it achieves (or returns to) profitability. The value-to-sales ratio exhibits how a lot you are paying for the inventory for every greenback of gross sales generated.

Finest Worth Cruise Line Shares
  Value ($) Market Cap ($B) 12-Month Trailing P/S Ratio
Carnival Corp. (CCL) 7.76 10.1 0.9
Lindblad Expeditions Holdings Inc. (LIND) 7.86 0.4 1.4
Norwegian Cruise Line Holdings Ltd. (NCLH) 13.32 5.6 2.3

Supply: YCharts

  • Carnival Corp.: Carnival operates the world’s largest fleet of cruise ships. The corporate additionally owns travel-related properties similar to accommodations and trip locations. Carnival reported Q2 2022 monetary outcomes on Sept. 30. Its web loss narrowed sharply to $770 million from $2.8 billion within the prior yr quarter as complete income rose almost eight-fold year-over-year (YOY). The corporate mentioned it was benefiting from hovering bookings, with 95% of Carnival’s capability serving visitors as of Sept. 30. The corporate mentioned it expects eight of its 9 cruise manufacturers to have their full fleet serving visitors by the tip of the yr.
  • Lindblad Expeditions Holdings Inc.: Lindblad Expeditions owns and operates cruise ships and supplies expedition cruising and journey companies. The corporate affords each sea-based and land-based expeditions. Lindblad Expeditions launched monetary outcomes for Q2 2022 on Aug. 2. Its web loss narrowed to $28.6 million in comparison with $35.7 million in Q2 2021. Whole income surged almost six-fold as the corporate ramped up service globally on all ten of its owned cruise ships.
  • Norwegian Cruise Line Holdings Ltd.: Norwegian Cruise Line operates a fleet of passenger cruise ships. As well as, the corporate affords itineraries and theme cruises. On Aug. 9, Norwegian Cruise Line launched its Q2 2022 monetary report. Its web loss shrank to $509.3 million from $717.8 million within the prior yr quarter as income rose dramatically to $1.2 billion from $4.4 million in Q2 2021.

These are the cruise line shares with the very best year-over-year (YOY) gross sales progress for the newest quarter. Rising gross sales may help traders to determine firms which might be capable of develop income organically or by means of different means and to search out rising firms that haven’t but reached profitability. As well as, accounting components that will not replicate the general power of the enterprise can considerably affect earnings per share (EPS). Nonetheless, gross sales progress also can show doubtlessly deceptive in regards to the power of a enterprise as a result of rising gross sales on money-losing companies will be dangerous if the corporate has no plan to succeed in profitability.

Quickest Rising Cruise Line Shares
  Value ($) Market Cap ($B) Gross sales Development (%)
Norwegian Cruise Line Holdings Ltd. (NCLH) 13.32 5.6 27,080
Royal Caribbean Group (RCL) 43.85 11.2 4,190
Carnival Corp. (CCL) 7.76 10.1 688.6

Supply: YCharts

  • Norwegian Cruise Line Holdings Ltd.: See above for firm description.
  • Royal Caribbean Group: Royal Caribbean Group, previously often called Royal Caribbean Cruises, operates a fleet of vessels within the cruise trip trade. On Aug. 30, Royal Caribbean introduced that it’ll supply high-speed web to passengers all through its complete cruise fleet by means of SpaceX’s Starlink, a high-speed web service. The set up is scheduled to be accomplished by the tip of Q1 2023 and is predicted to sharply enhance traditionally poor web service whereas cruise vessels are at sea.
  • Carnival Corp.: See above for firm description.

These are the cruise line shares that had the smallest declines in complete return over the previous 12 months out of the businesses we checked out.

Cruise Line Shares With the Finest Efficiency
  Value ($) Market Cap ($B) 12-Month Trailing Whole Return (%)
Lindblad Expeditions Holdings Inc. (LIND) 7.86 0.4 -47.5
Norwegian Cruise Line Holdings Ltd. (NCLH) 13.32 5.6 -51.5
Royal Caribbean Group (RCL) 43.85 11.2 -51.8
Russell 1000 N/A N/A -12.1

Supply: YCharts

  • Lindblad Expeditions Holdings Inc.: See above for firm description.
  • Norwegian Cruise Line Holdings Ltd.: See above for firm description.
  • Royal Caribbean Group.: See above for firm description.

Benefits of Cruise Line Shares

Shareholder Perks: A bit of-known advantage of holding cruise line shares is that they provide shareholder perks. As an illustration, traders who maintain at the very least 100 Carnival shares are entitled to a $250 onboard credit score for cruises which might be 14 days or longer, a $100 credit score for cruises between 7 and 13 days, and a $50 credit score for sailings of six days or much less. Equally, each Royal Caribbean and Norwegian Cruise Line supply comparable shareholder advantages. To say, traders want to offer their particulars and proof of possession, similar to a shareholder proxy card or a duplicate of a present brokerage assertion.

Pent-Up Demand: Cruise line firms have seen a bounce again in demand as clients ebook cruises they’d placed on maintain in the course of the COVID-19 pandemic. This positions operators within the sector to spice up income in upcoming quarters since most have their fleets again at complete capability and eliminated COVID vaccination necessities. Carnival reported in June that its ahead bookings have been on the greater finish of historic ranges, whereas Royal Caribbean mentioned in July that 2023 bookings in all quarters are at the moment booked inside historic ranges at report pricing. Furthermore, Royal Caribbean expects to return to profitability within the third quarter of 2022. Consequently, cruise line inventory costs could also be buoyed within the months forward as traders bake in enhancing earnings.

Dangers of Cruise Line Shares

Excessive Debt Load: Cruise line firms racked up substantial debt over the previous two years as they tried to remain afloat in the course of the pandemic. Carnival carried complete debt of $36.39 billion on the finish of the second quarter—greater than a three-fold enhance from $11.5 billion in 2019. Royal Caribbean’s debt ballooned from $11.73 billion to $23.85 billion over the identical interval, whereas Norwegian Cruise Line’s debt grew from $6.8 billion to $13.24 billion. With inflation resulting in greater gasoline prices and rising rates of interest, these elevated debt ranges will develop into more and more tough to service, rising the chance of share value dilution by means of additional capital raisings.

Future Pandemics: Cruise Line shares sank in the course of the pandemic, with the sector dealing with a number of challenges from dangerous publicity, no-sail orders, and a sluggish restoration. Within the early phases of the well being disaster, studies of main outbreaks spreading onboard put downward strain on the group. Promoting accelerated because the Facilities for Illness Management and Prevention (CDC) issued and prolonged no-sail orders. Though ahead bookings have bounced again in 2022, gross sales sit considerably under pre-pandemic ranges. For instance, each Carnival and Royal Caribbean reported respective income for the June quarter that got here in at 42% and 22% under the corresponding interval in 2019. These challenges remind traders that future pandemics stay a danger for cruise line shares.

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