Cruise Line Stocks Pricing In Higher Probability of Economic Duress; Shares Attractive

Amid continued concerns about inflation and the global geopolitical environment, the stock prices of the no-moat cruise majors we cover have struggled to stabilize in 2022, with the shares of Carnival falling 29%, Royal Caribbean down 20%, and Norwegian Cruise Line sliding 22% year to date through May 13. We contend that the market is underestimating pent-up consumer demand for travel, with COVID-19-related restrictions receding around the globe. More important, with most (or all) of these operators’ ships deployed, we don’t see liquidity concerns as paramount any longer, as cash burn slows and profitability approaches.