Analyst Note| Jaime M. Katz, CFA |
While still constrained by domestic regulations, no-moat cruise operators Carnival, Royal Caribbean, and Norwegian have nimbly pivoted to deploy their fleets abroad, lining up summer departures from the U.K., Italy, Greece, Cyprus, and others. Thus, there is renewed hope for near-term revenue generation, and we have recently increased our passenger counts for 2022, resulting in higher fair value estimates for both Carnival ($24, from $20 prior) and Royal Caribbean ($65, from $60 prior). We have not lifted our $27 per share fair value estimate on Norwegian, as the firm is set to deploy three of its 28 ships this summer, and we had already modeled an introduction of capacity in its third quarter. Additionally, with increased communication between the CDC and cruise operators, and explicit, conservative plans from operators to restart cruising safely (including required vaccinations and negative COVID-19 tests, among other measures), we surmise an explicit date for a domestic restart could be on the horizon.