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Does Norwegian Cruise Have Enough Cash to Survive?

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Norwegian Cruise Line Holdings stock fell 2.8 percent in the pre-market trading session today at 8:40 a.m. ET. The stock fell after the CDC extended a no sail order for cruise ships through September 2020. The CDC extended the order due to a surge in new coronavirus cases. The previous order was due to expire on July 24.

Norwegian Cruise does not expect to generate much revenue in the June ended quarter amid the coronavirus pandemic. As of June 30, the company has nearly $2.2 billion of cash and cash equivalents. The company plans to raise additional debt and equity to survive the COVID-19 pandemic.

Carnival and Royal Caribbean Cruises stocks also fell 1.1 percent and 3.0 percent in the pre-market trading session, respectively.

Analysts’ recommendations for Norwegian Cruise

Based on Reuters data, around 18 analysts track Norwegian Cruise stock. Among the analysts, six recommend a buy, 11 recommend a hold, and one recommends a sell. Analysts’ mean target price for the stock is $17.00, which implies a potential upside of 8.9 percent based on its last closing price.

Earlier this week, Paul Golding of Macquarie downgraded Norwegian Cruise from outperform to neutral. He also reduced his target price from $21 to $17. The analyst downgraded the entire cruise industry due to spiking coronavirus cases. According to a report from The Fly, “The analyst downgraded the entire Cruise sector on ‘surging’ COVID cases, the potential for an even more prolonged suspension of ships, and valuation. Reputational risk may be high if cruises cannot limit the spread of infections, increasing the risk that resumption timelines get pushed again, further impacting earnings and liquidity.”

Patrick Scholes of SunTrust also downgraded Norwegian Cruise from buy to hold. He reduced his target price from $14 to $13. The analyst downgraded the stock due to the delayed sailing restart dates.

Norwegian Cruise's stock returns

On Thursday, Norwegian Cruise stock fell 15.6 percent and closed at $15.61. The stock has fallen by 69.3 percent in the last 12 months and 25.5 percent in the last month. The stock is trading 122.1 percent above its 52-week low of $7.03 and 73.9 percent below its 52-week high of $59.78.

On Thursday, the stock was trading 4.0 percent below its 20-day moving average of $16.26. The stock is trading 4.8 percent below its 50-day moving average of $16.39 and 1.9 percent below its 100-day moving average of $15.92. The stock’s 14-day relative strength index score of 47 suggests that it is not oversold or overbought.

Norwegian Cruise stock has an upper Bollinger Band level of $18.77, while its lower Bollinger Band level is $14.16. On Thursday, the stock closed near its middle Bollinger Band level of $16.46, which suggests that it is neutral.

Wall Street analysts expect Norwegian Cruise to post sales of $25.5 million in the second quarter of 2020—a reduction of 98.5 percent year-over-year. Analysts expect the cruise company to report an adjusted EPS of -$2.21 in the second quarter compared to $1.30 in the second quarter of 2019.

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