Why Cruise Stocks Are Currently Bouncing
This week, there has been a bounce, and it is a significant one.
Precious Njoku is a Financial Writer with extensive knowledge about the stock market.
2022-02-10 18:26

Cruise line stocks are bouncing back from last week’s travails. Last week, Royal Caribbean (NYSE: RCL) fell 5% after missing fourth-quarter earnings targets. The company warned that its profitability and tourism industry had been affected by the surging omicron variant, but it would return to profitability later this year. Other peers Carnival (NYSE: CCL) and Norwegian Cruise Line Holdings (NYSE: NCLH) fell by 2% and 1% on Friday.
Why Cruise Stocks Are Currently Bouncing
But that was last week’s story. This week, there has been a bounce, and it is a significant one. Norwegian Cruise Line Holdings has grown 12.84% this week to stand at $23.72, Royal Caribbean has grown 9.45% and is selling at $88.05, while Carnival has risen by 12.96%. This growth is just for this week.

What can account for this tremendous surge in these cruise stocks? Well, here’s a brief on the companies to help you understand why.

For one, the coronavirus's omicron variant has been affecting these companies just like other companies in the tourism industry. That was why Royal Caribbean Royal Caribbean (NYSE: RCL) missed its earning expectations for Q4 2021. In their report, management warned that the variant would not diminish and would cut into the demand for bookings for H1 2022. However, the company gave a positive outlook for the future and said that they would return to profitability in just a few months. Unfortunately, that means the profit milestone foreseen by the company last year for 2022 will now be postponed to 2023.

Norwegian Cruise Line Holdings (NYSE: NCLH) is expected to release its Q4 2021 earnings report and revenue for the Fiscal year 2021 on February 24 this year. Its Q3 2021 earnings report complained of low demand due to the omicron variant and said that the company would return to profitability in H2 2022.

These are not good news for investors, and they responded negatively. But this week, analysts have been offering a positive take on the situation, which has helped the companies rebound. According to Steven Wiecynznski, an analyst with Stifel Nicolaus, the option left to cruise companies is to begin to float all their boats. Stifel Nicolaus says it will lower its 2022/2023 earnings estimates when this is done. However, they foresee that the delayed return to service of Royal Caribbean and Norwegian Cruise Line Holdings is only temporary and that by H2 2022, the variant headwinds would have abated.

Further, other analysts say the rebound of cruise stocks is because these companies are exceptionally set up as we head into H2 2022. As a result, the demand versus pricing patterns in the industry will continue to strengthen. It is also estimated that the risk surrounding increased capital raises by these companies seems, for the time being, remote.

I tend to agree with analysts on this take. Although the drag on profitability by the omicron variant is disappointing, from considering these companies and their history, this is likely a “short-term operational challenge.” Management's expectation of a return to profitability by the second half of this year is quite realistic.

The markets are also seemingly taking to the argument of the managers of Royal Caribbean about their projections and responding positively this week. There is renewed confidence in Cruise stocks given their rebound over the past four days. But S&P Global Market Intelligence believes that investors should not be expecting the impossible. The rebound will not be a fast event but would take time.

Disclaimer: I have no positions in any of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. All information should be independently verified and should not be relied upon for purposes of transacting securities or other investments. See terms for more info.

Rate this article

Published On
2022-02-10 18:26

About the Author
Precious Njoku is a Financial Writer with extensive knowledge about the stock market.

You've read 1 article in the last year
..thank you for supporting us and for visiting our site. Unlike many other sites, The Dog of Wall Street is available for everyone to read. Our focus is to provide great content for free. Do you like what we are doing? Buy us a cup coffee. It is the fuel that keeps us going..

AI-mazing returns: The top 3 AI stocks to invest in now!
Don't miss out on the opportunity to invest in these cutting-edge companies and be a part of the future of AI.
By Staff | 2 weeks ago

Goldman Sachs Trims the Fat with 3,200 Job Cuts
Goldman Sachs is cutting approximately 3,200 jobs from its core banking and trading units.
By Staff | 4 weeks ago

Tilray Q2 Earnings Leave Investors Wanting More
While Tilray has maintained its leading market share in the recreational cannabis market in Canada and the medical cannabis market in Europe, its Q2 earnings, which included a loss per share of -$0.11 and an adjusted loss per share of -$0.06, have left investors questioning the company's future growth prospects.
By Staff | 4 weeks ago

Qualcomm's partnership with Iridium takes connectivity to new heights
Qualcomm's partnership with Iridium brings satellite-based messaging technology to phones, laptops and other devices, providing new opportunities for connectivity in any location.
By Staff | 4 weeks ago

Hologic's Fiscal Q1 2023 Earnings: A Ray of Hope in a Stormy Year
Hologic has managed to achieve impressive financial results in Fiscal Q1 2023.
By Staff | 4 weeks ago

Why Small and Mid-Cap Stocks Deserve Your Attention
Why valuations make small and mid-cap stocks an attractive option in a potential recession.
By Staff | 4 weeks ago

Get Ready for a Bumpy Year
Despite strong job creation numbers, deeper issues lurk beneath the surface as the Federal Reserve's rate hikes and high inflation threaten to derail the economy.
By Staff | 4 weeks ago