Is It Time To Buy Cruise Stocks? Analyst Weighs In

Cruise stocks Carnival Corp (NYSE: CCL), Royal Caribbean Cruises Ltd (NYSE: RCL) and Norwegian Cruise Line Holdings Ltd (NYSE: NCLH) have been top market performers in the past month as cruise ships have finally begun sailing once again following a prolonged pandemic shutdown.

Unfortunately, Bank of America analyst Andrew Didora said Tuesday that it may take a while for cruising enthusiasm to recover to pre-pandemic levels.

Recovery Lagging: The entire travel sector has taken a hit from the spread of the delta variant of COVID-19, but Didora said the cruise industry is lagging the airline and hotel industries up to this point.

Related Link: Cruise Stocks In Limbo As Delta Variant Cancellations Derail Sales Recovery

Bank of America’s most recent cruise industry pricing checks revealed cruise prices were down across the board month-over-month as of Oct. 1. Norwegian prices dropped an average of 3.1%, while Carnival prices were down 4.5% and Royal Caribbean prices fell 9.2%.

Looking ahead, Didora said 2023 prices have remained relatively stable in recent months, while 2022 prices have dropped. Didora said these trends appear in line with Carnival’s recent commentary that it has seen strong demand since opening 2023 bookings early.

Didora is also tracking social media interest in cruises, where he says interest is “still low.” Total Instagram fans for Carnival, Norwegian and Royal Caribbean have not grown meaningfully since the beginning of the pandemic after strong periods of growth in 2018 and 2019.

“Total new fans have bounced off the bottom but still remain approximately 74% below pre-pandemic levels,” Didora said.

How To Play It: For now, Didora remains cautious on cruise stocks as a group. Bank of America has the following price targets and ratings for cruise stocks:

• Carnival: Neutral rating, $29 target
• Norwegian: Neutral rating, $30 target
• Royal Caribbean: Underperform rating, $65 target

Benzinga’s Take: The three cruise stocks are all up at least 113% since their March 2020 pandemic lows, which is a huge run for three businesses that are still struggling mightily to even get back to half of the business they were doing prior to their extended shutdowns.

The ultimate fate of the industry will be determined by how long it takes the leisure travel business to recover fully and whether or not the pandemic has permanently changed consumer demand.

Photo: Courtesy Royal Caribbean