Why Cruise Line Stocks Rebounded Today

The Motley Fool ^ | JUL 27, 2022 | Rich Smith

[Capt. Tom]

What happened Happy days are here again for cruise line stock investors -- but will they last?

After suffering four straight days of declines, shares of Carnival (NYSE: CCL) (NYSE: CUK) rebounded sharply this morning,

So what Cruise stock fans are pointing to a new survey out from Cruiseline.com that shows 91.4% of respondents saying they plan to take a cruise "within the next year," and 34% saying they will cruise within just the next two to four months. And yes, that sounds like good news for cruise lines, but beware. Because the bad news could still be coming.

Sometime later today, the Federal Reserve will reveal whether or not it will hike interest rates by 0.75% or by 1% this month. If the latter, cruise companies can expect to incur another $730 million in annual interest costs on their debts, which approach $74 billion already.

That's not good news.

Now what Last but not least, while Carnival has already delivered its bad financial news for this quarter, Royal Caribbean and Norwegian Cruise have not -- yet. Royal Caribbean is due to report its fiscal second-quarter results on Aug. 2, followed shortly by Norwegian Cruise reporting on Aug. 4.

Given the potential for Royal Caribbean and Norwegian Cruise to similarly disappoint next week, I continue to believe that investors are best advised to sit tight for now, and save their buying until after all the bad news has happened and been incorporated into these companies' share prices.

Dive into cruise stocks if you must. But before you do, make sure you know exactly how many sharks are swimming in these waters -- and how big they are.

[Capt. Tom]

I picked this somewhat upbeat article to get my 2 cents opinion in about the future of cruise lines.

I don't believe all of the big 3 cruise lines are going to make it without some form of a bankruptcy.

Thy are too far in debt, and with the future looking bleak, I don't see how they can pull it out.

They have aggravated unvaccinated people, have a recession coming that will affect many of their cruisers.

This is not just in this country, but worldwide.

So, in spite of all their happy talk, I figure this fall, the creditors will force a bankruptcy, or a big 3 cruise line will seek on it's own a Chapter 11 bankruptcy. -Tom

[BipolarBob]

Sell Mortimer Sell!

[Born in 1950]

I’ve never cruised.

But it seems to me that, given today’s culture, a large number of people confined for an extended period of time almost guarantees violence.

[packrat35]

I had intended to do a cruise last year. Been planning it for a couple of years, but the corona and then mandatory vax made that a no go.

With an impending depression and still having to be vaxxed, I have given up on ever going on a cruise.

[married21]

The ships are the size of a shopping mall. Not confining at all.

[Falconspeed]

I hope Carnival, Royal Caribbean and Norwegian stay in business, because running a cruise line takes massive intelligence and adventure. Simply deleting the covid vax requirement will keep them ‘afloat’ and going.

[Born in 1950]

“size of a shopping mall”

Not reassuring when given a moment’s thought :)

[Capt. Tom]

With an impending depression and still having to be vaxxed, I have given up on ever going on a cruise.

The cruise lines are going to have to fill their ships, and with higher prices, to pay off the Billions of debt they have accrued.

I don't see how they can do it with the future economy that I believe is coming. - Tom

[JohnnyP]

So glad. I bought Carnival at 18 last year. :)

[Born in 1950]

PS: Confined is confined. One can be confined in an elevator or a cruise ship. Right?

[abb]

[Tea Drinker]

I’d love to do an Alaska cruise, Mississippi River cruise & a Great Lakes Cruise but not vaccinated. We’ve talked about doing a “cousin” cruise but again, most of us unvaccinated.
The vaccine insanity will forever create problems for businesses as they discriminate against the unvaccinated trying to appease the vaccine crazies.

[willk]

I’m booked on 4 cruises over the next 2 years all on Carnival. Cruises are the best way to have a romantic time with your spouse while relaxing.

[abb]

https://finance.yahoo.com/m/e6b4447a-3528-3d90-9183-63c8c9f949b4/royal-caribbean-sees-return.html

Royal Caribbean Sees Return to Profitability in the Third Quarter
Sabrina Escobar
Thu, July 28, 2022 at 9:57 AM

Royal Caribbean Group will be profitable by the third quarter, the cruise company said on Thursday, giving the stock a boost in premarket trading. Royal Caribbean (ticker: RCL ) said it expects adjusted earnings per share of between 5 cents and 25 cents for the third quarter, which would mark the first time the company is profitable on an adjusted basis since December 2019. “We continue to see a robust and accelerating demand environment for cruising and on-board spend,” said CEO Jason Liberty.

[Capt. Tom]

This is from a month ago, from an analyst. Just his opinion. Tom

The hope of bulls was that, as the pandemic ebbed, Carnival revenues and operating profits would rise to pre-pandemic levels and its huge debts could be paid. That may prove impossible now. Cruising will survive, but an orderly bankruptcy that wipes out equity holders and forces bondholders to take haircuts could come this winter.