With $Carnival(CCL)$ Carnival Corporation & plc (CCL) reporting earnings today (27 March 2023 pre-market), let’s examine the current state of cruise line stocks and assess whether they are a good long-term investment.
Cruise line stocks have been on a rollercoaster ride since the onset of the pandemic.
While some stocks, such as $Royal Caribbean Cruises(RCL)$ Royal Caribbean Cruises and $Norwegian Cruise Line(NCLH)$ Norwegian Cruise Line Holdings, have risen sharply, they are still far from their pre-pandemic values. However, many investors are optimistic about the long-term prospects of these companies, given that the bulk of their customers are from affluent nations with an aging population, and cruising is often seen as one of the best ways to travel for older people due to its hassle-free and comfortable experience.
State of Cruise Line Stocks
Cruise line stocks have been some of the most volatile investments over the past three years. The pandemic caused widespread cancellations, and the industry was brought to a halt for several months. While cruise lines have been able to resume operations in the last year with the easing of the travel restrictions, they are still dealing with the fallout from the pandemic.
As of March 2023, the cruise line stocks are still far from their pre-pandemic value (See monthly charts below for the three cruise lines), and this could be an indication that they are undervalued. However, it is important to note that the cruise industry is still facing challenges such as inflation and the rising fuel prices.
CCL monthly chart
NCLH monthly chart
RCL monthly chart
Moreover, the cruise industry has been growing rapidly in recent years, and there is no reason to believe that this trend will not continue. According to the Cruise Lines International Association (CLIA), the number of global cruise passengers grew from 17.8 million in 2009 to 30 million in 2019. While the pandemic caused a temporary setback, the industry is expected to rebound in the coming years.
Despite the poor financial performance, the cruise industry is still attracting investors who believe in the long-term potential of the industry. Let’s explore the factors that could make cruise line stocks a good long-term investment.
Factors that Could Make Cruise Line Stocks a Good Long-Term Investment
Affluent Nations with Aging Population:
One of the factors that could make cruise line stocks a good long-term investment is the fact that the bulk of their customers are from affluent nations with aging populations. Cruise lines offer a hassle-free and comfortable experience, making them a popular choice for older people who want to travel. With the aging population in developed countries such as the US, Europe, and Japan, the demand for cruise travel could increase in the long term.
Increasing Demand for Sustainable Tourism:
Another factor that could make cruise line stocks a good long-term investment is the increasing demand for sustainable tourism. Cruise lines have come under scrutiny in recent years due to their impact on the environment. However, the industry has responded by adopting sustainable practices such as reducing emissions, recycling, and investing in renewable energy. In addition, there is a growing trend among consumers to prioritize sustainable travel options. Cruise lines that can demonstrate their commitment to sustainable tourism could attract more customers in the long term.
Potential for Industry Consolidation:
The cruise industry is highly fragmented, with several small players competing with the big three cruise lines: Carnival Corporation & plc (CCL), Norwegian Cruise Line Holdings Ltd. (NCLH), and Royal Caribbean Cruises Ltd. However, the pandemic has led to the bankruptcy of several smaller cruise lines, and this could create an opportunity for industry consolidation. The big three cruise lines can make good use of the opportunity to increase their market share and improve their financial performance in the long run.
Conclusion
In conclusion, while cruise line stocks have been volatile since the pandemic began, they still hold long-term potential for investors. The industry is expected to rebound in the coming years, and factors such as an aging population in affluent nations, increasing demand for sustainable tourism, and potential for industry consolidation make cruise line stocks an attractive investment option. However, you should be aware of the challenges that the industry is still facing, such as inflation and rising fuel prices, and should carefully consider if it is better to put your money somewhere else. Personally, I think it would be alright to put some money in cruise lines stocks for the purpose of diversification.
Let me know your thoughts on cruise line stocks in the comments. Thank you
@Daily_Discussion @TigerStars @MillionaireTiger @CaptainTiger
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