- The cruise line sector has taken a battering over the last four weeks after the emergence of the Omicron COVID variant pushed back the timeline once again on when operators can sail at 100% capacity.
- M Science updates on trends on the cruise line sector. Analyst Michael Erstad and team note that Q4 cumulative bookings through the end of November are pacing well behind 2019 levels as expected given limited capacity on ships that are sailing and more pandemic anxiety. Prices softened month-over-month across all operators, due to likely to the limited capacity available for close-in itineraries. Refund activity through October remained elevated across all operators compared to last year and two years ago, though was down significantly M/M and well below the prior year.
- Overall new booking activity for first-half 2022 sailings are also pacing behind 2019 levels across all operators, though Royal Caribbean Cruises (NYSE:RCL) and Norwegian Cruise Line Holdings (NYSE:NCLH) saw modest sequential improvement in November from October.
- The flareup of the Omicron variant has the focus in the cruise line sector back on balance sheet comparisons and debt loads. On some of those metrics, Carnival (NYSE:CCL) stands out as not quite as stretched as peers after the long period of debt accumulation and dilution.
- On a share return look, Lindblad Expeditions (NASDAQ:LIND) has a higher percentage of its cruise line ships in operations and has been a safer port for investors over the last year.
- Where there are COVID headlines, there is risk for cruise line stocks. However, short bets in the sector have fallen back with analysts still convinced the post-pandemic period will see a boom in pent-up demand for the sector. On the flip side, the Altman Z Scores in the sector are still a bad read on the financial health of cruise line companies.