Wall Street Is Backing Cruise Ships To Start A Fresh Rally 

Friday, June 18, 2021 | Sam Quirke
Wall Street Is Backing Cruise Ships To Start A Fresh Rally 

They still have a ways to go yet, but the major cruise ship stocks are steadily reclaiming the territory that was lost in 2020. For any investor that was brave enough to back them to not go out of business during the dark days of February and March of last year, the rewards have been great. Returns of more than 300% have been logged in the twelve months since but there are plenty of reasons to think their best days are still ahead. 

Like with the airline majors, cruise ships are vulnerable to any hiccups in daily COVID numbers or delays in the economic reopening. But also like with the airline majors, there’s undoubtedly some solid fundamental momentum behind them and it’s very much a question of not if but when will they get back to their pre-COVID levels. 

On Thursday, JPMorgan came out strong on the industry’s prospects for a full recovery, pointing towards positive booking momentum and positive pricing trends. They went so far as to raise out-year estimates for all the major operators which puts their call well ahead of the general consensus estimates for the group.

Royal Caribbean (NYSE: RCL)

Royal Caribbean is the hottest of the bunch according to JPMorgan, who reiterated their Overweight rating on the Miami based operator. In a note to clients, they said “we continue to prefer Royal Caribbean, based on comparatively impressive restart momentum, recent share underperformance, and longer-term operational / pricing momentum that we expect to continue post-COVID-19". 

Indeed, this underlying strength has been visible since the selling started to lose momentum in March of last  year. Royal Caribbean was the quickest to bounce back and has gone on to bounce back the hardest since. Its shares are up 345% from their low already, and JPMorgan sees them hitting $123 by the end of the year, implying upside of more than 40% from Thursday’s closing price. 

Norwegian Cruise Line (NYSE: NCLH)

Norwegian are also looked upon favorably by JPMorgan, and so they should with a 330% rally from last year’s all time low testament to how quickly Wall Street has bought into their recovery potential. A $38 price target from JPMorgan suggests there’s still room for a rally of more than 20% to be seen by the end of the year. 

Earlier this month they released an update on their plan for phased voyage resumptions starting this summer. UBS sees the path towards full resumption starting with approval for U.S. cruise restart, before gradually ramping occupancy and capacity in service.

Technically speaking, shares have been following a solid uptrend that’s in no danger of breaking and we can expect to see Norwegian shares trading above $35 for the first time since 2020 in the coming weeks. 

Carnival Corporation (NYSE: CCL)

A 10% drop in their shares since the start of the month means Carnival’s stock is only up 270% from their 2020 low. While it’s nothing to be sniffed at, they’re considered the weakest of the three majors. JPMorgan kept them at Neutral in Thursday’s update, but investors can still expect them to benefit from the ongoing positivity seen in the sector. The phase “a rising tide floats all boats” has perhaps never been more apt.

That’s not to say it won’t be bringing its own positive updates to the party. Earlier this quarter, the company reported that their Q1 bookings were up more than 90% from Q4. The vaccine rollout would have played a major role in this jump and it’s fair to say that it’s still a significant tailwind for shares to have as we head into the second half of the year. Management will still need to confront the two year old downtrend that shares were forming before the pandemic hit but UBS has a Buy rating on Carnival shares while JPMorgan, even with their Neutral rating, is still expecting them to reach $36 by the end of the year. This would put them at their post-pandemic highs and within touching distance of their pre-pandemic levels.

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Royal Caribbean Group (RCL)2.1$75.48-1.8%N/A-3.03Hold$85.92
Carnival Co. & (CCL)2.5$21.46-0.9%N/A-2.21Hold$28.75
Norwegian Cruise Line (NCLH)2.0$23.58-1.9%N/A-1.94Buy$30.18
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