The Covid pandemic was not kind to cruise stocks, with most of the stocks cratering on average by more than 70%. To survive, since no cruises could take place, the companies issued either more stock or took on more debt at higher interest rates.
In a rising interest environment, this new debt could be problematic, which is why the cruise stocks have sold off once again in a short span of just two years. Yet, not all seems so gloomy surrounding cruise stocks since travel has seen an uptick.
Finbold has identified two cruise stocks that could have the potential to survive the new selling pressure and come out of this ‘crisis’ on top.
Carnival Corp. (NYSE: CCL)
Despite being touted as the poster child for the ‘troublesome’ cruise stocks, the company posted a quarter of improving results. It was not a perfect quarter; however, the company and the sector were showing signs of returning to normal times in the travel and leisure sector.
Further, the earnings showed a miss on earnings per share (EPS) of $0.54 from the estimates, making a total EPS of -$1.61; similarly, the reported revenue of $2.4 billion represented a miss of $360 million. Yet, the occupancy rates for the quarter were up by 69%, with revenues rising 50%.
The stock performance year-to-date (YTD) is nothing to write home about, as they’re down over 58%. Recent trading sessions have seen the shares close below all daily Simple Moving Averages (SMAs) and close to the lows seen in the pandemic days. Currently, the trading range seems to be between $8 and $11.
Comparably, analysts rate the shares a hold, predicting that the average next 12-month price could reach $14.29, 62.02% higher than the current trading price of $8.82.
Royal Caribbean Cruises (NYSE: RCL)
Currently, the company operates 62 passenger ships, including five of the world’s biggest cruise ships. Shares are trading near the March 2020 levels despite passable return to most operations, with key fundamentals yet to recover; however, numerous catalysts seem to be in place to increase the earnings well above the pre-Covid levels.
The last earnings report showed revenue of $1.06 billion, an increase of 2,423% year-on-year (YoY), but still a miss by $90 million. Similarly, the EPS was -$4.57, missing estimates by $0.09, with the company expecting to return to profitability in the second part of 2022.
YTD shares are down over 56%, with the bulk of the drop seen in May, with high selling pressure also seen in June. RCL closed well below all SMAs, trading in a wide range between $42 and $33.
On the other hand, TipRanks analysts rate the shares a moderate buy, predicting that in the next 12 months, the shares could reach an average price of $80, 126.69% higher than the current trading price of $35.29.
In conclusion, cruise companies have made it through previous recessions, yet, now there’s the uncertainty of more leverage that hangs above their heads.
On the other hand, things change quickly and are quite unpredictable; there are no signs that current global macro pressures will spill over onto cruise stocks while the travel season is now in full bloom.
For the risk-tolerant, these two stocks just might represent a perfect way to invest and enjoy the sunshine with the potential of the stock prices recovering after a strong summer holiday season.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.