Stock Market

Hold Norwegian Cruise Line Stock Despite Analyst Warning

Miami-headquartered Norwegian Cruise Line (NYSE:NCLH) provides exhilarating international getaways. Some analysts on Wall Street might not envision a positive environment for the cruise market, but risk-tolerant traders should still think about holding a few NCLH stock shares.

Norwegian Cruise Line is a perfect example of a cyclical stock. When the overall economy is in the positive part of the cycle, cruise stocks tend to perform well. On the other hand, the negative part of the economic cycle can have a drastically negative impact on cruise stocks.

Certainly, it’s easy to construct an argument that 2022 will present macro-level economic challenges for Norwegian Cruise Line. Informed investors should be aware of these risks. Yet, a bullish counterargument can be made as some data points weigh in favor of Norwegian Cruise Line.

Ticker Company Price
NCLH Norwegian Cruise Line Holdings Ltd. $11.73

What’s Happening with NCLH Stock?

In the weeks prior to the Covid-19 crisis in America, NCLH stock traded near $59. Fast-forward to mid-2022, and the stock was recently spotted trading at $13 and change. Does this represent a toxic asset, or the bargain of a lifetime? The answer depends on one’s outlook for the economy in general and for Norwegian Cruise Line in particular.

As for the economy in general, macro-level factors include the rate of Covid-19’s spread, inflation and how the consumers will respond to it, high fuel and labor costs, as well as the potential for a recession this year. All of these factors will have an impact on the demand, or lack thereof, for cruises.

Analysts with BofA Global Research undoubtedly had these factors in mind when they assigned a “neutral” rating to NCLH stock. These analysts suggested that cruise demand “seems to be eroding” as they observed cruise-pricing weakness extending into 2023 and 2024.

An Explosive Showing

Thus, the BofA Global Research analysts have adopted a “more cautious stance on cruise stocks.” Their points are duly noted, so there’s no need to load the boat on Norwegian Cruise Line shares now.

Even if you’re cautious about NCLH stock, you can still hold the shares with some confidence. That is because there are data points specific to Norwegian Cruise Line which paint a surprisingly positive fiscal picture.

Specifically, during 2022’s first quarter (Q1), Norwegian Cruise Line posted a $1 billion net earnings loss. That’s actually a good result compared to the $1.4 billion net loss from the prior-year quarter.

Turning to the top-line results, we can observe that Norwegian Cruise Line’s revenue increased dramatically, from $3.1 million in 2021’s first quarter to $521.9 million in Q1 2022.

On top of all that, Norwegian Cruise Line forecast that its operating cash flow will be positive for the current quarter. Chief Executive Officer (CEO) Frank Del Rio proudly proclaimed, “We are seeing an explosive showing by consumers, particularly American consumers. Consumer spend is strong, snapping back and even exceeding where we left off in 2019.”

What You Can Do Now

Will the NCLH stock price snap back along with consumer spending? Only time will tell. However, Norwegian Cruise Line’s CEO certainly seems more confident than the BofA Global Research analysts.

The bottom line is that investors have to be realistic. The Norwegian Cruise Line share price isn’t likely to revisit pre-Covid-19 levels anytime soon. However, $20 is a possibility as Norwegian Cruise Line’s financial data suggests that a powerful comeback could be in progress.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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