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Norwegian Cruise Line: Big Ships Turn Slowly - Have Patience

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  • The NCHL management has shown great competency in managing the elevated interest rate risks, attributed to the debt swap to mostly fixed rates by FQ2'23.
  • While Brent has risen dramatically to $93.53 at the time of writing, potentially increasing its Fuel Expenses, the management has also hedged part of the fuel risks through derivative agreements.
  • The cruise booking trends have surpassed pre-COVID levels, with NCHL reporting excellent advanced ticket sales of $3.5B and ~60% in booked position over the next twelve months.
  • However, due to its minimal Free Cash Flow generation, we may see the Cruise Line refinance its debts at elevated interest rates, depending on the market funding condition.
  • Therefore, NCHL is only suitable for investors whom are patient, since big ships turn rather slowly, with a wide gap to its pre-pandemic profitability.

Aerial top view of a white pleasure boat on a summer day. Powerboat turn loop eight on the sea making metaverse infinity future concept.

.shock/iStock via Getty Images

The Cruise Line Investment Thesis Remains Mixed

We previously covered The Royal Caribbean Cruises (RCL) and Carnival Corporation (CCL) in various other articles, covering their stocks' optimistic rally thanks to the robust

This article was written by

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I am a full-time analyst interested in a wide range of stocks. With my unique insights and knowledge, I hope to provide other investors with a contrasting view of my portfolio, given my particular background.Prior to Seeking Alpha, I worked as a professionally trained architect in a private architecture practice, with a focus on public and healthcare projects. My qualifications include:- Qualified Person with the Board of Architects, Singapore.- Master's in Architecture from the National University of Singapore.- Bachelor in Arts from the National University of Singapore.If you have any questions, feel free to reach out to me via a direct message on Seeking Alpha or leave a comment on one of my articles.

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Comments (3)

It appears that NCLH will not get as much Fed relief as earlier hoped......
Powell signaled multiple times yesterday that the Fed might keep rates
''higher for longer'' ......this might not be good news for NCLH oncoming
debt interest expense projections which impact profits over the
next 1-3 years.......

I feel that Boomers will make up the majority of NCLH North American
ticket sales & these folks are relatively insulated from macro economic
ups and downs as they are often retired and have more stable income

Patience is indeed required to ride out the current stock price weakness
and to see the strong price action in the years to come.

Long NCLH and still making additions as the stock price dips below $15
I want to take an Alaskan cruise after reading this. Great article.
Juxtaposed Ideas profile picture
@Natturner1966 Thank you for the kind words! We love our family cruise trips as well.
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