Will Norwegian Cruise Line Sink or Swim Longer Term???

When the COVID-19 first made headlines, the cruise ships were bound to take a hit. Among the cruise ships, Royal Caribbean was hit the hardest because Royal Caribbean generated almost 10% of its revenue from China in the last 12 months.

Carnival had their share of bad press as well. For example, Diamond Princess owned by Carnival that was docked in Japan in which the entire ship was quarantined where passengers were confined to their cabin. Over 600 people got infected during those two weeks, including two passengers that have since died.

Despite the outbreak, the IMF said it was sticking to its January forecast for 3.3 percent growth in the global economy this year, up from 2.9 percent in 2019. But we haven’t seen all that will be affected yet. But you really didn't hear much about Norwegian Cruise Line

Norwegian Cruise Line Holdings Ltd., together with its subsidiaries, operates as a cruise company in the United States and internationally. The company operates the Norwegian Cruise Line, Oceania Cruises, and Regent Seven Seas Cruises brands in various locations, Russia, the Mediterranean, Canada, Asia, South America, etc.

The first time we heard about the Norwegian and the adverse affects due to COVID-19 was when they announced earnings a couple of months ago. During the earnings announcement, the company said the virus was expected to shave 75 cents off 2020 EPS as the COVID-19 outbreak impacts consumer travel sentiment.

Then about one month ago, Royal Caribbean, Carnival, Norwegian and other companies in the industry were thrown a curve ball when the Centers for Disease Control and Prevention extended its initial No Sail Order for an additional 100 days…until late July.

Norwegian Cruise Line Holdings Ltd, the world's third-largest cruise operator, raised doubts about its ability to keep running as a business on Tuesday, the first in the sector to signal it may succumb to the coronavirus crisis.

"COVID-19 has had, and is expected to continue to have, a significant impact on our financial condition and operations, which adversely affects our ability to obtain acceptable financing," Norwegian said, also flagging substantial doubt about its ability to continue as a "going concern."

The company said that as of April 24, advanced bookings for the remainder of the year were "meaningfully lower than the prior year, with pricing down mid-single digits." Norwegian's shares have lost almost 80% of their market value this year.
Norwegian said it does not have sufficient liquidity to meet its obligations over the next 12 months.

Source

But it’s not smooth sailing yet. Like the airline industry, the cruise line industry is a capital intensive industry…you have the ships, then the employees and the ships to operate and maintain. Then on top of that you need customers to come back. Like the airline industry, COVID-19 has changed the behavior of humans forever which will trickle down to the cruise line industry.

The chart suggests to don't even consider buying Norwegian until price gets above $17.50.

This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.