Cruise stocks took it on the chin during the pandemic. It should surprise exactly nobody that cruise liners haven’t been very active during the pandemic. So naturally, stock values plummeted alongside revenue. However, investors looking for a good deal have been swooping in and pushing valuations higher. However, there’s still growth left in this sector of the travel industry. But the window for opportunity isn’t going to stay open forever…
Pre-pandemic, cruises were the fastest growing sector in the leisure travel industry. According to post-cruise surveys, a whopping 92% said they would probably book a cruise for their next vacation as well.
There were also key demographic factors working in cruise lines’ favor. Cruises were beginning to draw younger crowds. Millennials and Gen-Xers preferred cruises to all-inclusive resorts, tours and other land-based vacation options. In fact, cruising was the favorite means of vacation by other generations by a substantial margin. It’s at least one reason cruise stocks have remained so sustainable.
And here’s the last key point that shows cruises are poised for a comeback. The average adult on a cruise already has five other cruises under their belt. There’s growing adoption of cruises as a means of vacation. And with that growth, comes strong loyalty. All of which adds up to a whole lot of people itching to get back on a cruise ship. And they’re about to get their shot…
Cruise Stocks That Are About to Start Making Money Again
- Carnival Corp (NYSE: CCL)
- Royal Caribbean Cruises Ltd. (NYSE: RCL)
- Norwegian Cruise Line Holdings Ltd. (NYSE: NCLH)
The big cruise stocks have seen a lot of interest from value investors looking for a good deal. They’re an example of where many analysts are moving away from flashy growth stocks. A more back-to-basics investing approach is what they’re prescribing investors look into.
Tech stocks – while they’ll always have a place in a diversified portfolio – won’t lead the pack forever. Many of the high-flying work-from-home stocks have run their course. Because the times, they’re poised to change again.
As Liberty Through Wealth’s Alexander Green recently wrote:
To be a successful investor… flip the script and buy what’s out of favor, knowing that with time all sectors, industries and market classes will shine again.
In other words, industries that struggled to stay afloat though the pandemic will soon rise with the incoming tide of pent-up demand. On top of that, you’d be hard-pressed to find an area of the economy with as much pent-up demand as the travel industry. And the demand for travel has never had the cooped up financial funding quite like it has now. And those holding cruise stocks could be in a very promising position.
When Savings Turns to Spending
When economies shut down around the world, some industries failed. An estimated 110,000 restaurants and bars closed in the U.S. Lots of them for good. Many of them received little to no relief from Congressional stimulus packages. And the same went for cruise lines. Carnival took on an additional $4 billion in debt to try to get over the pandemic hump. Situations like this sent cruise stocks tumbling.
Unlike independent restaurants and bars, cruise lines had more options to withstand the loss of demand for their services. And now that they’ve almost made it, the light at the end of the tunnel is starting to shine.
We’ve already covered the fact that cruise liners have developed strong loyalty amongst passengers. Those that have cruised before will more likely than not be cruising again. And it’s more likely than ever that they’ll have the money to do so when they can. And the when is getting very close.
Norwegian Cruise Line Holdings recently asked federal health authorities to allow it to set sail from U.S. ports starting July 4. The company cited CDC guidance for allowing fully vaccinated passengers to travel due to the low risks involved.
In a follow-up statement though, the CDC responded, saying that, “Cruising safely and responsibly during a global pandemic is difficult.” Massive rollout of vaccinations be damned, cruise liners were left wondering just when or if business as usual would ever return to business as usual. This type of back and forth has set cruise stocks into some choppy waters.
But around the world, things are indeed starting to propel once again – or at least many have offered hard dates as to when they will.
With some exceptions, Carnival plans to resume many of its cruises July 1. Same goes for Royal Caribbean. And Norwegian Cruise Lines expect to resume normal operations by Sept. 2.
Big Tabs for Big Demand
Already, high-ticket around-the-world cruises are selling out. The opportunity to pay $500,000 for a cruise two-years in advance is growing increasingly difficult. And it’s safe to say that not only folks with a half-million dollars to blow on travel are willing to do so.
With demand so high, cruise companies are facing pressure to significantly raise their prices. And why wouldn’t they? Tickets for cruises of all sizes are flying off the virtual shelves. And that will mean big boons for the holders of cruise stocks.
Online travel company, Expedia (Nasdaq: EXPE) has developed a whole new suite of tools to support customer demand for cruise searches. And travel agents are seeing more bookings for 2022 at this point than they did back in 2019. To put it bluntly, cruise lines are in a better position now than they have been in years.
The Bottom Line on Cruise Stocks
There’s already been a lot of speculation around the cruise line industry. When will business get back to normal? When business returns, will it go smoothly? And will those that missed out on more than a year of travel be able to recover their losses?
The answer is a pretty resounding, yes. The industry has already developed a loyal following. And when that following is able to travel again, it’ll have more money than ever before to spend on cruises. The pent-up demand and increased savings is also likely to bring in a new clientele.
All of this really comes down to government regulation though. And restrictions – by most accounts – appear to be lifting thanks to the rapid rollout of vaccinations. And if demand increases at its current clip, cruise lines will be forced to raise their prices… All of which is good news for anyone holding shares of cruise stocks.
If you’d like to stay on the lookout for other value stocks trading at a discount, we suggest signing up for the Liberty Through Wealth e-letter. In it, Chief Investment Strategist Alexander Green helps readers find the companies and strategies still untapped with lots of valuable potential.
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