Cruise line stocks have been extremely volatile this year. While they bounced back in April and May, they fell in June and July as reopening expectations faded. Year-to-date, Norwegian Cruise, Carnival Corporation, and Royal Caribbean Cruises stocks have fallen 74, 70, and 57 percent, respectively. Cruise line stocks are now the worst-performing group in the S&P 500. So, what’s the outlook for cruise line stocks for this rest of this year?
How Norwegian Cruise Line stock is looking
Norwegian Cruise Line stock has risen 122 percent from its 52-week low. After being weak in June and July, the stock has risen almost 15 percent in August. Cruise activity has been halted, and as a result, Norwegian posted net revenue of just $17 million in the second quarter. That figure is just 1 percent of what it made in the corresponding quarter last year. Meanwhile, its net loss swelled to $666 million in the second quarter.
We have made the decision to further suspend cruise voyages across our fleet through 10/31/20. To provide additional transparency, beginning in August, we’ll provide an update at the end of each month regarding the status of voyage suspensions: https://t.co/dVwYw43wOC pic.twitter.com/cgn0KDUPza— Cruise Norwegian (@CruiseNorwegian) July 29, 2020
What is Norwegian's stock forecast?
Analysts polled by Refinitiv expect Norwegian Cruise stock to rise over the next year to $16.14, which implies an upside of only 3.2 percent from its current price. Six analysts have a "buy" or higher rating on Norwegian stock, while 11 suggest "hold" and one suggests "sell."
Norwegian Cruise Line has taken several measures to survive the slump. It has raised capital through a mix of debt and equity issuance, and lowered its capital and operating expenses. Although such measures should slow its cash burn rate, cruise activity has to resume for the company to survive. Stocks like Norwegian Cruise are a high-risk bet that depends on a credible vaccine for COVID-19 being developed and made available.
What is Carnival's stock price?
Carnival stock closed at $15.80 yesterday and is up 103 percent from its 52-week low. It has risen almost 14 percent in August. Like Norwegian, Carnival has increased its liquidity, and it has the capacity to raise more cash by issuing debt and selling some non-core assets. During the company’s second-quarter earnings call, CEO Arnold W. Donald said, “Additional cash conservation efforts, combined with future liquidity measures, will enable us to sustain ourselves beyond 12 months into late next year, even in a zero-revenue scenario.”
Carnival's stock forecast
Analysts' mean price target of $15.13 for Carnival implies a 4.4 percent downside over the next year. Two analysts have rated the stock as "strong buy," 13 suggest "hold," and four suggest "sell." Whereas Carnival and Norwegian stocks have bounced back over the last two weeks, some analysts are advising caution. Bank of America has lowered its target price on Royal Caribbean and Norwegian Cruise stocks.
While cruise stocks are down this year, they should do well when we have a solution in the form of a coronavirus vaccine. The progress in developing vaccine candidates has been impressive so far.