- Macquarie upgrades the cruise line sector to Outperform from Neutral.
- Analyst Paul Golding: "With all three major US cruise lines reporting FY20 results, suspension extensions now in place for most through mid-spring, and with COVID cases dropping and vaccine penetration rising, we think most negative catalysts are now in the rear-view mirror and think the next possible round of suspensions could be bookended by a firmer resumption announcement in the US. Technical instructions from the CDC are also forthcoming and could drive more confidence. And while the risk of new variants could make a resumption choppy, vaccine modifications and lockdown fatigue could make these less impactful."
- The Macquarie analyst team notes cruise line shares have bounced quite a way off their one-year lows, and barring recession or a sector rerating, the catalysts is anticipated to trend more positive from here into summer when leisure demand should pick up. June 30 is seen as the likely scaled resumption date for sailings.
- "Once the cruise lines start throwing off cash in a normalized environment (starting at some point in FY22 we think), not only should the deleveraging offset currently high EVs, interest savings that start to flow to the bottom line ~FY23 should drive EPS improvement vs. consensus, driving share prices even higher."
- The firm now has Carnival (NYSE:CCL), Royal Caribbean (NYSE:RCL) and Norwegian Cruise Line Holdings (NYSE:NCLH) all slotted at Outperform, with the most upside seen for NCLH followed by CCL and then RCL.
- Premarket: CCL +0.46%, RCL +1.63%, NCLH +1.55%.
- Compare recent trading momentum of the three cruise line stocks.