Smoother Sailings Ahead for Cruise Stocks?

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Keep an eye on cruise line stocks.

Earlier this week, UBS upgraded Norwegian Cruise Line Holdings (NCLH) to a buy rating thanks to significant improvements in bookings.

Better, Norwegian just told investors that its occupancy rates would jump to about 82% in Q3 2022 from 65% in Q2 2022.  With that, UBS analysts said the preview of the third-quarter numbers showed the company has “caught up to other cruise lines in occupancy while still keeping price nicely ahead of 2019 levels,” as noted by Barron’s.

UBS also believes NCLH shares can rally at least 30% with improved bookings.

In addition, as noted by CFO Mark Kemp, as quoted by Yahoo Finance:

“If you look at Q3 in our most recent guidance, we had said that our total net revenue per diems are expected to be up in the high single digits. So, again, inflation is real, it is starting to level off, we are going to see some near-term pressure on margins, but we don’t believe that this is going to be a long-term sustainable margin issue. As we look at our trends and our business over the next year to two years, we see margin improvements significantly. And we believe we can get back to the same margin levels we saw prior to the pandemic.”

NCLH last traded at $12.98 – up $1.35 on a volume spike to 40.3 million shares.

UBS also has a buy rating on Royal Caribbean (RCL).  Analysts say occupancy rates are bouncing back strongly, and because prices for 2022 and 2023 bookings are up to record levels.  RCL last traded at $45.36 – up $4.67 on a volume spike to 11.48 million shares.