The cruise industry is working hard to recover from the pandemic, and bookings have been on an upswing lately. The U.S Centers for Disease Control recently lifted Covid 19 related restrictions, which could be a major catalyst in growing bookings in the latter half of the year. Indeed, cruise stocks remain among the highest-leverage plays investors looking to benefit from near-term catalysts can jump on.
The Cruise Lines International Association (CLIA) recently released a statement that over 75% of its member ships have resumed service, with almost all expected back on the seas by late summer. Moreover, it projects passenger metrics to grow past pre-pandemic levels by the conclusion of next year.
With cautious optimism, let’s look at three of the largest (and best) cruise stocks to invest in at this time.
|RCL||Royal Caribbean Cruises||$47.65|
|NCLH||Norwegian Cruise Line||$14.31|
Carnival Corporation (NYSE:CCL) is the world’s largest cruise operator, and among the best cruise stocks to own right now. With 91 ships across its cruise line banners, Carnival has an overall capacity of over 243,000 berths. That’s massive.
The company’s ships have been docked at port for the better of the past couple of years. Accordingly, CCL stock has struggled under the weight of its massive debt load. However, in recent quarters, revenues have started to flow in at an incredible pace, and are likely to continue growing at a robust clip.
Revenues in the company’s second and third quarters have grown by 4,702% and 688.5%, respectively, on a year-over-year basis. Moreover, Carnival’s CFO David Bernstein talked about the cruiseliner’s potential to sail past its 2019 EBITDA levels next year with the removal of coronavirus restrictions. Bookings for the full year are likely to be above historical averages, and at considerably higher prices compared to its 2019 results.
Also, CCL generated more than $300 million in adjusted EBITDA in the third quarter, expecting to narrow down net losses in the upcoming quarters. These forecasts are highly encouraging, considering the seasonality of its business. Despite these positives, CCL stock is trading as if it was going bankrupt.
Royal Caribbean Cruises (RCL)
Royal Caribbean Cruises (NYSE:RCL) is another leading cruise line operator with a healthy 25% market share in the sector. Similar to its peers, RCL stock has been pulverized in the markets over the past couple of years. However, its business has bounced back from the pandemic with solid operating results.
In its second quarter, the company posted a handsome revenue beat, with revenues skyrocketing from $50.9 million to $2.18 billion as it returned its entire fleet to operation. Moreover, despite posting a hefty loss in the quarter, Royal Caribbean’s management expects it to swing to GAAP profitability in the upcoming quarter.
Perhaps one of the biggest advantages for RCL is that the majority of its long-term debt of $17.74 billion is tied to fixed interest rates. Hence, it’s effectively shielded from the effects of the Fed’s rampant rate hikes. Moreover, the company’s aggregate debt load is significantly less than its competitors. This bodes well for its long-term recovery.
Norwegian Cruise Line (NCLH)
Norwegian Cruise Line (NYSE:NCLH) is another leading cruise line operator specializing in upscale cruising. Moreover, this company operates a world-class fleet, which continuously improves every year.
Similar to its peers, NCLH is experiencing a resurgence of sorts. The company recently announced its final move to remove Covid-19 restrictions. It announced the removal of all testing, masking, and vaccination requirements. The removal of restrictions will likely lead to a massive surge in bookings in the upcoming quarters at prices above pre-pandemic levels.
Analysts are already forecasting 2023 revenues for the company to reach $8 billion, a $1.5 billion improvement from 2019 levels. Moreover, analysts at UBS assigned a bullish rating to the stock, seeing its earnings per share price surging to $1.55 in 2023 compared to its prior forecast of $1.44. Moreover, UBS assigned a price target of $15, which represents nearly 25% upside from current prices.
On the date of publication, Muslim Farooque 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.