Cruise stocks down but still attractive despite coronavirus, analysts say

Stocks of major cruise operators, Royal Caribbean and Norwegian Cruise Line, have slid more than 16 percent and 11 percent respectively so far in 2020.

Royal Caribbean has called off 18 cruises in Southeast Asia due to the coronavirus outbreak, warning of a 25-cent per share impact to first quarter results, and at least a 65-cent hit to full-year results.

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Norwegian Cruise Line saw earnings decline by two percent in the third quarter and, according to analyst expectations, could see further decline.

Rating agency Moody’s said that in 2020 combined lodging and cruise earnings growth are expected to slow between four and five percent, indicating a decline from its earlier expectations of six to seven percent growth.

But while bearish near-term, some experts say cruise shares could be in for smoother sailing.

“Despite the impact of the coronavirus, our long-term rating remains BUY based on our expectations for continued favorable demographics in the cruise industry,” said analysts from Angus.

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Investment bank Stifel’s analyst Steven Wieczynski wrote in a note: “If media attention continues to be outsized, could that have an impact on close-in bookings/pricing? Probably so, but we don’t believe this type of ‘noise’ will impact bookings volume for an extended period of time.”

A recent Deloitte study showed that overall cruise industry trends have been on the upswing for much of the past decade, growing at a compounded annual growth rate (CAGR) of 5.2 percent between 2009 and 2017. The number of cruise passengers grew from 10.4 million to 12.4 million during that time.

According to the Cruise Lines International Association, 32 million passengers are expected to cruise in 2020, which is an improvement from 30 million in 2019.

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