The cruise ship industry has experienced a meteoric storm as the COVID-19 pandemic destroyed inventory Carnival (NYSE: CCL), Norwegian Cruise Line (NYSE: NCLH), and Royal caribbean (NYSE: RCL) in the past three months with losses of 60% or more.
Yet Credit Suisse analyst Benjamin Chaiken believes that the time has come to embark on an adventure with these companies. In the short term, their financial performance will be further undermined, but it should go smoothly.
Not all cruise ships are created equal
Chaiken has started coverage on Carnival, Norwegian and Royal, although he considers the last two cruise lines to be better investments. He wrote in a note to investors that people will eventually start vacationing and that the cruise industry’s value proposition will boost business, according to TheFly.com.
Because the three cruise operators took positions to improve their liquidity during the coronavirus crisis, he does not foresee bankruptcy as a possibility for any of them. However, despite Carnival’s seemingly attractive assessment, he doesn’t see her outclassing Norwegian Cruise Lines or Royal Caribbean, and found it neutral in her new cover.
The Norwegian and Royal, on the other hand, will likewise see profits hit a huge blow this year, but are expected to rebound with capacity gains approaching 100%. He rates them both as outperformers.
It should be noted that the analysis is at odds with other analysts who believe that the attractive prices that Chaiken highlights are in fact the “next shoe to give up” for the industry.