15th Feb 2023
Cruise stocks may be the travel stocks that suffered the most from the pandemic, but to far-sighted investors, now is the time to buy at lower prices, and benefit from the long-term recovery.
Cruise stocks are sailing stormy seas
The situation is still challenging for cruise stocks. The near-total lockdown from March 2020 to July 2021 left every cruise line bearing hefty debt. Rising interest rates could inflate that burden even more1; a number of popular routes to China, St. Petersburg, and Baltic ports are unavailable; rising fuel prices add to expenses; and inflation could deter passengers2, possibilities which deter risk-averse investors.
However, many analysts3 see cruise stocks as a lucrative option in the long run. The trends are encouraging: almost 6 million passengers sailed since the cruise industry’s restart in July 20214; most cruise ships have returned to the seas and 16 new ones were launched5; and cruise companies predict rising numbers and a return to profitability by end 20226.
The three leading cruise lines continued investing in new ships, private islands, and new ports, helping ensure their ongoing viability7, and loyalty among cruise aficionados is strong. Pre-pandemic, cruise companies were growing their appeal among younger audiences, and have increased their commitments to sustainability since COVID-198.
Cruise stocks could be a profitable long-term investment
To investors hoping to cash in on the cruise recovery, the recent fall in cruise stock prices9 makes this an even better time to buy. Cruise stocks delivered strong returns before the pandemic, and there are many reasons to expect them to do so again, even if they have a long way to go.
“When business returns, will it go smoothly? Will cruise stocks recover? The answer is a pretty resounding yes.” says Matthew Makowski, senior research analyst at Investment U10. In a similar vein, JPMorgan analyst Daniel Adam declares that the outlook for cruise stocks is still “more positive than not.11” For investors who share their perspective and want to take part in the market, we’ve gathered 4 of the best cruise stocks for investing in 2023.
1. Defiance Travel ETF (CRUZ)
Many investors are interested in buying into cruise stocks now, feeling that prices will rise in the long term even though there’s still a way for them to go till they reach full recovery. But as analysts like Daniel Adam warn12, you need to choose carefully, because it’s still hard to predict which are the best cruise stocks and which could ultimately sink forever.
That’s why Defiance’s CRUZ Travel ETF could be a good solution. A cruise ETF lets you spread your investment across numerous cruise stocks with a single purchase, making it easier for retail investors with small portfolios to mitigate their exposure to risk.
CRUZ is a broad travel ETF that covers leading cruise stocks as well as companies in the airline, hotel, and wider travel sectors, which enables you to benefit from the travel recovery in its largest sense. CRUZ tracks the rules-based weighted BlueStar Global Hotels, Airlines, and Cruises Index, has an expense ratio of 0.45%, and is currently trading at $16.1513.
2. Royal Caribbean Cruises Ltd (RCL)
Florida-based Royal Caribbean is the second largest cruise stock, with a number of cruise brands floating under its umbrella. Like all cruise stocks, Royal Caribbean suffered during the 2020-2021 shutdown, but it never stopped investing in expanding the brand. During the pandemic it launched two new ships, one of them the largest cruise ship in the world, and continued building private islands to add more revenue streams and provide destinations that it can control14.
Royal Caribbean’s September earnings filing reported positive EBITDA and operating cash flow for the first time since before COVID-19, with trends and pricing for 2023 ahead of 2019 levels15. Bookings exceeded those for 2019, and are expected to rise even further in 202316.
Daniel Kline, managing editor for The Street, is bullish for Royal Caribbean stock. “Royal Caribbean’s stock may take years to recover, but the company was solidly profitable before the pandemic. It should turn from a loss to a profit in the latter half of 2022 and then, barring another global pandemic, the company should be able to work its way back to being the preeminent mass market cruise line,” he writes.17
3. Norwegian Cruise Line Holdings (NCLH)
Norwegian’s stock prices are still down more than 70% from its pre-pandemic high18, but many analysts consider it the cruise line best positioned to recover quickly despite its smaller fleet capacity1920, making today’s low stock prices a feature, not a bug. Norwegian plans to introduce eight more ships through 202721.
In Q3 2022, total revenue reached $1.6 billion, still well below 2019 levels,22 but occupancy and onboard revenue grew significantly, pointing to Norwegian’s strong recovery. Occupancy rose to 82%, and is expected to reach the mid-high 80s in Q4 and 100% by Q2 2023,23 while onboard passenger revenue grew to 14% over 2019 levels, breaking previous records24. Norwegian has set a pricing strategy of “high value over low price,” which has deterred some passengers, but its high onboard revenue generation shows that the policy is paying off.25
Norwegian is Daniel Adam’s top cruise stocks pick, thanks to its “greater opportunity for growth, which we consider a positive against the backdrop of strong pent-up leisure travel demand and the attractive value proposition that cruise lines offer versus land-based vacation alternatives.26” Norwegian is currently trading at $12.14.27
4. Carnival Corp (CCL)
The world’s largest cruise line has a mixed rating. Some analysts point to disappointing Q3 earnings which reported losses of $0.65 per share, far worse than the predicted $0.13 per share, and revenue that came in $800 million below projections28. Analysts are also concerned about its large debt burden and low liquidity.29
But others focus on positive metrics while emphasizing the need to take a long-term view, advising cautious investing.30 Carnival is expected to return to productivity in fiscal year 202331, booking trends are excellent32, and metrics like total revenue and onboard revenue are up significantly over the previous quarter33. By December, losses had shrunk slightly more than expected and occupancy rose to 90% or more, and is forecast to return to historic levels by summer 202334.
“Booking volumes strengthened following the relaxation in protocols, cancellation trends are improving globally, and we have seen a measurable lengthening in the booking curve, across all brands,” said Carnival CEO Josh Weinstein35. Carnival is currently trading at $7.6736.
1 “Debt-loaded cruise lines’ shares fall as Fed hikes rate and recession fears grow” September 23, 2022 https://www.cnbc.com/2022/09/23/cruise-line-stocks-fall-fed-rate-hike-recession-worries.html
2 “Why You Should Buy the Dip on This Cruise Line Stock” November 21, 2022 https://www.fool.com/investing/2022/11/21/why-you-should-buy-the-dip-on-this-cruise-line-sto/
3 “Cruise Stocks: Six Reasons a Valuable Recovery Is Still in Store” August 16, 2022 https://investmentu.com/cruise-stocks/
“Why this cruise stock remains JPMorgan’s favorite as leisure travel keeps roaring” December 6, 2022 https://www.marketwatch.com/story/why-this-cruise-stock-remains-jpmorgans-favorite-as-leisure-travel-keeps-roaring-11670338937
“Why Royal Caribbean and Carnival Stock Will Recover” September 30, 2022 https://www.thestreet.com/investing/why-royal-caribbean-carnival-stock-are-good-buys
4 “CLIA Expects Nearly All Ships Back by July, Full Recovery by 2023” January 27, 2022 https://www.travelagentcentral.com/cruises/clia-releases-2022-outlook-all-ships-back-july-full-recovery-2023
5 “CLIA Expects Nearly All Ships Back by July, Full Recovery by 2023” January 27, 2022 https://www.travelagentcentral.com/cruises/clia-releases-2022-outlook-all-ships-back-july-full-recovery-2023
6 “Cruise ships are set to sail, but investors are wary” April 4, 2022 https://www.barrons.com/visual-stories/cruise-outlook-carnival-stock-2022-01648846207
7 “Why Royal Caribbean and Carnival Stock Will Recover” September 30, 2022 https://www.thestreet.com/investing/why-royal-caribbean-carnival-stock-are-good-buys
8 “CLIA Expects Nearly All Ships Back by July, Full Recovery by 2023” January 27, 2022 https://www.travelagentcentral.com/cruises/clia-releases-2022-outlook-all-ships-back-july-full-recovery-2023
9 “Why Carnival and Other Cruise Line Stocks Are Bouncing Back Today” October 4, 2022 https://www.fool.com/investing/2022/10/04/why-carnival-and-other-cruise-line-stocks-are-boun/
10 “Cruise Stocks: Six Reasons a Valuable Recovery Is Still in Store” August 16, 2022 https://investmentu.com/cruise-stocks/
11 “Why this cruise stock remains JPMorgan’s favorite as leisure travel keeps roaring” December 6, 2022 https://www.marketwatch.com/story/why-this-cruise-stock-remains-jpmorgans-favorite-as-leisure-travel-keeps-roaring-11670338937
12 “Why this cruise stock remains JPMorgan’s favorite as leisure travel keeps roaring” December 6, 2022 https://www.marketwatch.com/story/why-this-cruise-stock-remains-jpmorgans-favorite-as-leisure-travel-keeps-roaring-11670338937
13 Accessed December 29, 2022 https://www.defianceetfs.com/cruz/
14 “Should I Buy Royal Caribbean Stock?” June 25, 2022 https://www.thestreet.com/investing/should-i-buy-royal-caribbean-stock
15 “5 Best Travel Stocks To Buy Right Now” December 20, 2022 https://www.insidermonkey.com/blog/5-best-travel-stocks-to-buy-right-now-2-1100905/
16 “11 Best Cruise Stocks To Buy Right Now” October 3, 2022 https://finance.yahoo.com/news/11-best-cruise-stocks-buy-123531030.html
17 “Should I Buy Royal Caribbean Stock?” June 25, 2022 https://www.thestreet.com/investing/should-i-buy-royal-caribbean-stock
18 “Why You Should Buy the Dip on This Cruise Line Stock” November 21, 2022 https://www.fool.com/investing/2022/11/21/why-you-should-buy-the-dip-on-this-cruise-line-sto/
19 “11 Best Cruise Stocks To Buy Right Now” October 3, 2022 https://finance.yahoo.com/news/11-best-cruise-stocks-buy-123531030.html
20 “Why this cruise stock remains JPMorgan’s favorite as leisure travel keeps roaring” December 6, 2022 https://www.marketwatch.com/story/why-this-cruise-stock-remains-jpmorgans-favorite-as-leisure-travel-keeps-roaring-11670338937
21 “Here’s Why Investors Should Retain Norwegian Cruise (NCLH) Now” December 8, 2022 https://www.nasdaq.com/articles/heres-why-investors-should-retain-norwegian-cruise-nclh-now-0
22 “Why You Should Buy the Dip on This Cruise Line Stock” November 21, 2022 https://www.fool.com/investing/2022/11/21/why-you-should-buy-the-dip-on-this-cruise-line-sto/
23 “Here’s Why Investors Should Retain Norwegian Cruise (NCLH) Now” December 8, 2022 https://www.nasdaq.com/articles/heres-why-investors-should-retain-norwegian-cruise-nclh-now-0
24 “Why You Should Buy the Dip on This Cruise Line Stock” November 21, 2022 https://www.fool.com/investing/2022/11/21/why-you-should-buy-the-dip-on-this-cruise-line-sto/
25 “Why You Should Buy the Dip on This Cruise Line Stock” November 21, 2022 https://www.fool.com/investing/2022/11/21/why-you-should-buy-the-dip-on-this-cruise-line-sto/
26 “Why this cruise stock remains JPMorgan’s favorite as leisure travel keeps roaring” December 6, 2022 https://www.marketwatch.com/story/why-this-cruise-stock-remains-jpmorgans-favorite-as-leisure-travel-keeps-roaring-11670338937
27 Accessed December 29, 2022 https://www.google.com/search?q=norwegian+cruise+stock+price&oq=norwegian+cruise+stock+price&aqs=chrome..69i57j46i199i465i512j0i512l3j69i61j69i60j69i61.3254j0j4&sourceid=chrome&ie=UTF-8
28 “Why Carnival and Other Cruise Line Stocks Are Bouncing Back Today” October 4, 2022 https://www.fool.com/investing/2022/10/04/why-carnival-and-other-cruise-line-stocks-are-boun/
29 “Why Carnival and Other Cruise Stocks Sank on Thursday” December 22, 2022 https://www.fool.com/investing/2022/12/22/why-carnival-stock-and-other-cruise-stocks-sank-on/
“Carnival Survived the Pandemic, but Investors Should Probably Avoid the Stock for This Reason” December 20, 2022 https://www.fool.com/investing/2022/12/20/carnival-survived-pandemic-investors-avoid-stock/
30 “Why Royal Caribbean and Carnival Stock Will Recover” September 30, 2022 https://www.thestreet.com/investing/why-royal-caribbean-carnival-stock-are-good-buys “Carnival Corporation’s (NYSE:CCL) Outlook is Improving. Should You Buy?” December 26, 2022 https://www.nasdaq.com/articles/carnival-corporations-nyse:ccl-outlook-is-improving.-should-you-buy
31 “Carnival Survived the Pandemic, but Investors Should Probably Avoid the Stock for This Reason” December 20, 2022 https://www.fool.com/investing/2022/12/20/carnival-survived-pandemic-investors-avoid-stock/
32 “Carnival Corporation’s (NYSE:CCL) Outlook is Improving. Should You Buy?” December 26, 2022 https://www.nasdaq.com/articles/carnival-corporations-nyse:ccl-outlook-is-improving.-should-you-buy
33 “Why Royal Caribbean and Carnival Stock Will Recover” September 30, 2022 https://www.thestreet.com/investing/why-royal-caribbean-carnival-stock-are-good-buys
34 “Carnival Corp posts smaller loss as it tightens control on costs” December 21, 2022 https://www.yahoo.com/entertainment/carnival-corp-misses-quarterly-revenue-144215249.html
35 “Carnival Corp posts smaller loss as it tightens control on costs” December 21, 2022 https://www.yahoo.com/entertainment/carnival-corp-misses-quarterly-revenue-144215249.html
36 Accessed December 29, 2022 https://www.google.com/search?q=carinval++cruise+stock+price&ei=Xl-tY9efLYyqkdUPn5iW0AI&ved=0ahUKEwjXxu2jw578AhUMVaQEHR-MBSoQ4dUDCA8&uact=5&oq=carinval++cruise+stock+price&gs_lcp=Cgxnd3Mtd2l6LXNlcnAQAzIHCAAQgAQQDTIHCAAQgAQQDTIHCAAQgAQQDTIHCAAQgAQQDTIHCAAQgAQQDTIHCAAQgAQQDTIHCAAQgAQQDTIGCAAQHhANMgYIABAeEA0yBggAEB4QDToKCAAQRxDWBBCwAzoHCAAQsAMQQzoGCAAQBxAeSgQIQRgASgQIRhgAUJYIWNIPYN0RaAJwAXgAgAGYAYgBywmSAQMwLjmYAQCgAQHIAQrAAQE&sclient=gws-wiz-serp