The cruise line industry is part of the broader travel and tourism industry, focused primarily on providing sea-based vacation experiences. Companies in the industry own and operate cruise ships in various destinations worldwide, offering a variety of itineraries and themed cruises. They also may provide other travel and vacation services. The big cruise line companies include Carnival Corp. and Norwegian Cruise Line Holdings Ltd.
The cruise line industry has been severely affected by the COVID-19 pandemic, related travel restrictions, and other social-distancing measures. Many cruise operators ceased ship operations for many months throughout the early portion of the pandemic. Now many lines have resumed the majority of their cruise operations and bookings have soared compared to 2019, before the pandemic. However, additional issues hamper the industry: cruise companies have struggled to hire back employees, which has led to cancellations and reduced on-board amenities.
All pure-play cruise line stocks available to U.S. investors are underperforming the broader market, having provided total returns below the -12.1% total return of the Russell 1000 Index over the past 12 months. There is no specific benchmark index for the cruise industry. The market performance number above and all statistics in the tables below are as of Oct. 4, 2022. Below, we look at the top three cruise line stocks with the best value, fastest growth, and best performance.
There are just four pure-play cruise line companies easily available to U.S. investors, but we look at them in our usual style. Because the entire industry has suffered losses in recent quarters, the value section below will be based on price-to-sales ratio rather than the usual price-to-earnings ratio (P/E Ratio). Also, the revenue growth rates in the growth section further below are abnormally high because revenue in the most recent quarter is being compared to extremely low baseline levels in the year-ago quarter as a result of COVID-19 restrictions. Even relatively small absolute value changes in revenue have resulted in enormous percentage changes.
Best Value Cruise Line Stocks
These are the cruise line stocks with the lowest 12-month trailing price-to-sales (P/S) ratio. For companies in early stages of development or industries suffering from major shocks, this can be substituted as a rough measure of a business's value. A business with higher sales could eventually produce more profit when it achieves (or returns to) profitability. The price-to-sales ratio shows how much you're paying for the stock for each dollar of sales generated.
|Best Value Cruise Line Stocks|
|Price ($)||Market Cap ($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|
- Carnival Corp.: Carnival operates the world’s largest fleet of cruise ships. The company also owns travel-related properties such as hotels and vacation destinations. Carnival reported Q2 2022 financial results on Sept. 30. Its net loss narrowed sharply to $770 million from $2.8 billion in the prior year quarter as total revenue rose nearly eight-fold year-over-year (YOY). The company said it was benefiting from soaring bookings, with 95% of Carnival's capacity serving guests as of Sept. 30. The company said it expects eight of its nine cruise brands to have their full fleet serving guests by the end of the year.
- Lindblad Expeditions Holdings Inc.: Lindblad Expeditions owns and operates cruise ships and provides expedition cruising and travel services. The company offers both sea-based and land-based expeditions. Lindblad Expeditions released financial results for Q2 2022 on Aug. 2. Its net loss narrowed to $28.6 million compared to $35.7 million in Q2 2021. Total revenue surged nearly six-fold as the company 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. In addition, the company offers itineraries and theme cruises. On Aug. 9, Norwegian Cruise Line released its Q2 2022 financial report. Its net loss shrank to $509.3 million from $717.8 million in the prior year quarter as revenue rose dramatically to $1.2 billion from $4.4 million in Q2 2021.
Fastest Growing Cruise Line Stocks
These are the cruise line stocks with the highest year-over-year (YOY) sales growth for the most recent quarter. Rising sales can help investors to identify companies that are able to grow revenue organically or through other means and to find growing companies that have not yet reached profitability. In addition, accounting factors that may not reflect the overall strength of the business can significantly influence earnings per share (EPS). However, sales growth can also prove potentially misleading about the strength of a business because growing sales on money-losing businesses can be harmful if the company has no plan to reach profitability.
|Fastest Growing Cruise Line Stocks|
|Price ($)||Market Cap ($B)||Sales Growth (%)|
|Norwegian Cruise Line Holdings Ltd. (NCLH)||13.32||5.6||27,080|
|Royal Caribbean Group (RCL)||43.85||11.2||4,190|
|Carnival Corp. (CCL)||7.76||10.1||688.6|
- Norwegian Cruise Line Holdings Ltd.: See above for company description.
- Royal Caribbean Group: Royal Caribbean Group, formerly known as Royal Caribbean Cruises, operates a fleet of vessels in the cruise vacation industry. On Aug. 30, Royal Caribbean announced that it will offer high-speed internet to passengers throughout its entire cruise fleet through SpaceX's Starlink, a high-speed internet service. The installation is scheduled to be completed by the end of Q1 2023 and is expected to sharply improve historically poor internet service while cruise vessels are at sea.
- Carnival Corp.: See above for company description.
Cruise Line Stocks With the Best Performance
These are the cruise line stocks that had the smallest declines in total return over the past 12 months out of the companies we looked at.
|Cruise Line Stocks With the Best Performance|
|Price ($)||Market Cap ($B)||12-Month Trailing Total 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|
- Lindblad Expeditions Holdings Inc.: See above for company description.
- Norwegian Cruise Line Holdings Ltd.: See above for company description.
- Royal Caribbean Group.: See above for company description.
Advantages of Cruise Line Stocks
Shareholder Perks: A little-known benefit of holding cruise line stocks is that they offer shareholder perks. For instance, investors who hold at least 100 Carnival shares are entitled to a $250 onboard credit for cruises that are 14 days or longer, a $100 credit for cruises between 7 and 13 days, and a $50 credit for sailings of six days or less. Similarly, both Royal Caribbean and Norwegian Cruise Line offer comparable shareholder benefits. To claim, investors need to provide their details and proof of ownership, such as a shareholder proxy card or a copy of a current brokerage statement.
Pent-Up Demand: Cruise line companies have seen a bounce back in demand as customers book cruises they had put on hold during the COVID-19 pandemic. This positions operators in the sector to boost profits in upcoming quarters since most have their fleets back at total capacity and removed COVID vaccination requirements. Carnival reported in June that its forward bookings were at the higher end of historical ranges, while Royal Caribbean said in July that 2023 bookings in all quarters are currently booked within historical ranges at record pricing. Moreover, Royal Caribbean expects to return to profitability in the third quarter of 2022. As a result, cruise line stock prices may be buoyed in the months ahead as investors bake in improving earnings.
Risks of Cruise Line Stocks
High Debt Load: Cruise line companies racked up substantial debt over the past two years as they attempted to stay afloat during the pandemic. Carnival carried total debt of $36.39 billion at the end of the second quarter—more than a three-fold increase from $11.5 billion in 2019. Royal Caribbean's debt ballooned from $11.73 billion to $23.85 billion over the same period, while Norwegian Cruise Line's debt grew from $6.8 billion to $13.24 billion. With inflation leading to higher fuel costs and rising interest rates, these elevated debt levels will become increasingly difficult to service, increasing the risk of share price dilution through further capital raisings.
Future Pandemics: Cruise Line stocks sank during the pandemic, with the sector facing multiple challenges from bad publicity, no-sail orders, and a sluggish recovery. In the early stages of the health crisis, reports of major outbreaks spreading onboard put downward pressure on the group. Selling accelerated as the Centers for Disease Control and Prevention (CDC) issued and extended no-sail orders. Although forward bookings have bounced back in 2022, sales sit significantly below pre-pandemic levels. For example, both Carnival and Royal Caribbean reported respective revenue for the June quarter that came in at 42% and 22% below the corresponding period in 2019. These challenges remind investors that future pandemics remain a risk for cruise line stocks.
The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. Though we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.
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