Carnival, Royal Caribbean could see big boost from China reopening - Wells Fargo
Wells Fargo expects the cruise industry to benefit from China’s reopening both as a destination and a market for “high quality, high yielding customers.”
While Norwegian Cruise Lines (NCLH) ceased operations in China in 2019, both Carnival Corp. $Carnival(CCL)$ and Royal Caribbean $Royal Caribbean Cruises(RCL)$ are anticipated to see a big boost from the ending of pandemic restrictions on cruise travel. Prior to the pandemic, Shanghai and Hong Kong were the number 3 and 4 busiest cruise ports in the world, behind only Singapore and Taipei.
Equity analyst Daniel Politzer sees the roll-off of restrictions as a longer term tailwind for the latter two cruise lines as Chinese consumers steadily become comfortable with cruises again over the course of the next few years.
“With China travel resuming and the cruise industry recovering, we estimate RCL and CCL reallocating pre-COVID levels of capacity back to China (6% and 4%, respectively) could support higher yields equating to +$6/share for RCL and +$1/share for CCL,” he projected.
Despite the expected boost to each, ratings on the two stocks diverge. Politzer rated Carnival Corp. (CCL) at Underweight, while rating Royal Caribbean (RCL) at Overweight.
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