When the March 2020 crash happened, many investors preached about a “V-Shaped Recovery”. When we were at the bottom, I thought they were just trying to sell the public a pipe dream. For how ugly the market had looked for about two weeks, I was sold there would be another leg down, especially with no businesses open. Nonetheless, I was quite wrong. 15 months later and the market overall is higher than before the crash. Most businesses have been able to now look past the pandemic, or have found a way to use it to their benefit. Cruise line stocks have not seen this complete recovery though. They have grinded higher over the 15 months, but still have substantial room.
This post from December 12th shows an excel analysis of stocks that hadn’t covered their drop but would benefit from the vaccine. In this analysis we discovered the cruise line sector was the most opportunistic, at the time they were missing on average 50.23% from year highs. Norwegian Cruise Line Holdings ($NCLH) was the best individual stock as it still needed 55.67% to close its 88.24% drop.
Where The Cruise Lines Are At
Seeming that air travel is more of a necessity than cruises, airlines have erased losses a little more. Although, cruise lines have recently begun to rise. In the past month Royal Caribbean ($RCL) is up 11.6%, currently sitting at $94.07. $NCLH is at $32.12 and is up 12.78% this month, with Carnival Cruise Lines not too far behind at $30.54, up 14% this month.
If you were lucky enough to buy all three of these right after the blog post on December 12th, you would be up on average 35%! Having this confidence of proven recovery with room to go still makes each cruise line a buy. The vaccine has lowered worries around Covid-19. Even though cruises can be a hot spot for a virus, most are planned to resume globally sometime in mid-summer.
Recovery = Good Quarters
The recovery is not complete yet, and it is certainly not too late. According to USA Today, people have been booking cruises 6+ months in advance, just waiting for restrictions to be lifted. Plenty of cruises have been burning cash trying to stay alive during this pandemic. When the revenue starts coming the quarterly reports will be incredibly improved.
Sometimes the market can be what I like to call automated. If a company can beat earnings expectations one quarter, the stock price has a little surge. But how is this expectation formed for the most part? By performance over the past few quarters, fundamentals are not tied into the expectation enough. Analysts won’t factor in enough how much consumers will react to the resumption of cruises and they will continue to look at the burned cash. All the cruise line stocks will have low expectations, and when there’s a big beat, things can get rocking!
The Common Trader 