After a horrendous year in 2020, cruise stock investors haven’t gotten the rebound they were hoping for in 2021.
Unfortunately, Bank of America analyst Andrew Didora said 2022 is now looking like an increasingly difficult environment for Carnival Corp (NYSE:CCL), Royal Caribbean Cruises Ltd (NYSE:RCL) and Norwegian Cruise Line Holdings Ltd (NYSE:NCLH).
Recovery Timeline Extended: On Tuesday, Didora said cruise pricing weakness that was previously confined to the first half of 2022 is now expanding into the second half of the year. The good news for cruise stock investors is that 2023 pricing has remained steady thus far.
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“With case counts rising in Europe throughout November and the omicron variant now spreading, this might suggest near-term risks on cruise pricing, which is slightly concerning heading into the January/February wave booking season,” Didora said.
In December, Carnival prices took the biggest hit of the big three cruise stocks, with prices declining 4.1% compared to November. Didora said Carnival pricing weakness isn’t particularly surprising given the company’s exposure to Europe, which has seen a rise in COVID-19 cases.
Royal Caribbean prices bounced back by 4.2% in December following two consecutive months of at least 8.8% declines.
Norwegian prices dropped 1.3% month-over-month in December, according to Bank of America.
The majority of the pricing weakness in the second half of 2022 also comes from Carnival at this point. Didora said Carnival cut its second-half 2022 prices by 3.5% on average, while Royal Caribbean and Norwegian kept their prices relatively stable.
How To Play It: At this point, Didora said he remains cautious on the cruise stocks as a group. Bank of America has the following ratings and price targets for the big three:
- Carnival: Neutral rating and $29 target.
- Norwegian: Neutral rating and $27 target.
- Royal Caribbean: Underperform rating and $75 target.
Benzinga’s Take: The last thing cruise stock investors want to hear is that the extremely difficult environment is extending further into the future. The ultimate fate of the industry will be determined by how long it takes the leisure travel business to recover fully and whether or not the pandemic has permanently changed consumer demand.
Photo: Courtesy Norwegian Cruise Line