Stock of the Week: Norwegian Cruise Line

We’re raising our fair value estimate – a bit - as we expect passenger levels above 2019 by 2023

Andrew Willis 29 March, 2021 | 4:28AM

 

 

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Andrew Willis: Right now, it may seem hard to imagine getting back on a cruise ship – but we think that day will come. Indeed, it looks like there may be brighter skies ahead for cruise lines, although some clouds of pricing pressure could remain…

Look at Norwegian Cruise Line, for example. Considering the company’s passenger count was down a hundred percent in the last three quarters of 2020, it’s going to take some time and money to get the fleet going again.

To do that, the company accessed more than 6 billion U.S. dollars in debt and equity to help keep everything afloat – buying it about a year.Going ahead, Senior analyst Jaime Katz thinks there will be plenty of passenger demand and says numbers may potentially meet – and surpass - pre-covid levels in just a few years. He’s raising his fair value estimate to 27 U.S. dollars.

On the flip side, while passenger count could go up, we’re not too sure it’s enoughto raise ticket prices. Until 2029 we see pricing grow maybe in the low single-digits, while total costs, excluding fuel, rise 1-2% on average over the long term.

If you’ve set your sails on a cruise line stock, Norwegian could offer advantages on costs to look out for, thanks to its newer fleet that’s more efficient and easier to deploy – which means sooner sales and any necessary first-hand due diligence for investors, of course.

For Morningstar, I’m Andrew Willis.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Norwegian Cruise Line Holdings Ltd29.26 USD-4.19

About Author

Andrew Willis

Andrew Willis  is Content Editor for Morningstar.ca. Follow him on Twitter @AndrewWillisCDN.

 

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