Entering text into the input field will update the search result below

Dilution Factors Aside, Norwegian Offers Growth Momentum


  • The DCF analysis suggests a modest present overvaluation with a fair price of $16.31, but an exceptionally promising future price of $56.92, offering an impressive annual return of 46%.
  • While NCLH's current cash reserves may not fully offset expected negative Free Cash Flow (FCF) in 2023, the calculated dilution scenario provides a viable solution.
  • NCLH's historical industry resilience and experienced leadership make it a compelling investment opportunity, with the potential for strong annual returns from 35% to 46% through 2028.

Katy Perry Christens Norwegian Prima in Reykjavik, Iceland

Tristan Fewings/Getty Images Entertainment


Norwegian Cruise Line Holdings, LTD. (NYSE:NCLH) endured significant challenges during the pandemic, resulting in a substantial debt burden that will affect its future net income margin. For the purpose of this projection spanning from 2023

This article was written by

I have been involved in investing since the age of 16, initially delving into factoring, a fixed income instrument. This venture proved to be both risky and intricate, given the lack of available financial information and the necessity to gauge a company's liquidity through alternative methods. Currently, I am in my second semester of university. My investment strategy predominantly revolves around the medium to long term. I gravitate towards stocks exhibiting robust growth potential or those offering attractive dividends. Specifically, I am drawn to companies in the technology sector, as well as those involved in streaming and manufacturing. In my articles, the majority of the stocks I discuss are categorized as "buys" or "strong buys." I refrain from shorting stocks due to the associated risks. Occasionally, for the sake of variety, I may publish articles featuring "sell" ratings.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in NCLH over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (10)

Militiades profile picture
Someone is dreaming. In this environment buy some under $12. You're not going to see 40+ a share if you're over 50.
Debt double the MC, that hardly ever ends well.....
I’m sorry but I believe that Norwegian balance sheet has been destroyed to the point of having no equity left a huge debt problem and with interest rates going up please explain how this company will grow because I think if a recession hits next year and oil going to 100 there is a risk of bankruptcy
The Beginner Investor profile picture
@steve lupo Well, first, as already said, it has already 8 ships in order. I suppose that for making that order they needed to do a demand study because it's not just like they are going to buy 20 cruises and their revenue will shoot up. So growth for the term in this valuation is secured, next thing, if a recession starts, oil prices are probably tanking, and the OPEP+ can't just continue to strangulate supply forever. Oil prices have proven to be more elastic than cruising demand.
Finally, I already said that in a recession, cruise demand was still strong, so there is no worry for that.
@The Beginner Investor point is well said but understand one thing. In the past cruise lines were very well capitalized. They could do well because they could afford to give away cabins and Mae money on the Extras. Very true. But the destruction in their balance sheet replaced with high expensive debt they no longer can do that. They can only charge high prices and bank on high extras like last summer which enabled them to show good profits for their high season. Not repeatable. As bad as Covid was for them last summer was the big bounce. Unfortunately no go enough to pay back all the losses during Covid. Next year won’t be the same. Do t you agree that consumers will not be as exuberant or cash rich as last year.
Ryan Garcia profile picture
@steve lupo You are talking in a US centric view. There is a growing number of passengers from Asia, Europe and other emerging markets. For example, China is experiencing a huge growth of cruise industry (very competitive for sure). The growth in emerging markets will offset the potential stagnation of US. Also, you are assuming that US will fall into a bad recession next year, which cannot be proven at this point. Travelling is part of human nature and the demand will continue to stay unless the economy truly tanks like 08-09.
Sapphire Wealth Insights profile picture
I'm having trouble understanding several statements in your article.
You mentioned that after conducting a DCF analysis, the present fair value is roughly $15, but the future value can be over $50. This appears confusing to me because the fundamental concept of a DCF analysis is to evaluate a company's fair present (equity) value based on its future cash flows, meaning the implied share price the company should have today if your assumptions about the future come true.
So, I don't understand what you're referring to by this "future value" of over $50 you mentioned.

Furthermore, it seems you're implying a WACC of less than 5%. Could you please provide more details or clarification regarding this assumption? It seems incredibly low.

Moreover, is it right that you've used a 10% Terminal Growth Rate? Frankly, this number is ridiculous.
The Beginner Investor profile picture
@Sapphire Wealth Insights Well the first point is because a DCF model discounts the cash flows you are expecting in the future to obtain a present value of those cash-flows, but as well you can "undiscount" these cashflows and obtain a future value. This has to do with the principle of buying "great businesses at fair prices", since if people just invested because of the present value, then the scope of the possible investments would reduce. That's why in my DCF iI give present and future price, and how the company performs will affect the future price, if the company is fairly valued, a little overvalued, or undervalued, but has a good future value, then I enter.
Finally, the present fair value my DCF gave is $16.31.
"The DCF analysis yields a present fair price of $16.31, indicating a modest overvaluation by 5.27% based on my metrics."

The WACCs I calculate are based on formulas, I don't assume a WACC and say, "I assume this WACC because I think it's conservative", I just let the model calculate the WACC. You can see the formula there in the DCF model where it says "WACC Calculation", I had made articles where I got WACCs of 10%+.

Regarding the terminal growth rate, I don't calculate it, I just search a lot of consensus and put the average, because the 10% long term growth rate, in theory should go beyond the projected period, and I don't have enough resources to conduct such an extensive analysis on how many people will go cruising in 2045, and what events in the future could impact it based on news dating back to 1945.
Thanks for analysis. Long time holder, who is determining his plan for NCHL going forward.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

About NCLH

SymbolLast Price% Chg
Market Cap
Yield (TTM)
Rev Growth (YoY)
Short Interest
Prev. Close
Compare to Peers

More on NCLH

Related Stocks

SymbolLast Price% Chg
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.