Analyst: Cruise Industry On Life Support Heading Into Q4

It’s been a brutal year for cruise stocks, and the latest data from Bank of America suggests little hope for improvement in the fourth quarter.

On Friday, analyst Andrew Didora said U.S. cruise line spending is still virtually nonexistent, and there’s little hope of significant improvement until current no-sail orders are lifted.

More Delays: Norwegian Cruise Line Holdings Ltd NCLH, Carnival Corp CCL and Royal Caribbean Cruises Ltd RCL have all canceled most or all of their November cruises.

Bank of America aggregate credit card data suggests cruise spending in the month of September was down 93.7% from a year ago, a slight improvement from its 104.2% drop in August. Didora said the month-over-month improvement was mostly due to a slowdown in refunds rather than new purchases. Core cruise spending was down 86% year-over-year in September, in line with its 86% decline in August.

“With the no sail order extended through the end of October, we expect to see similar trends in next month’s data, and we anticipate a slow recovery as cruise lines gradually add back ships to service at sub-50% occupancy levels,” Didora wrote in the note.

Related Link: Here's How Much Investing $1,000 In The 2013 Norwegian Cruise Line IPO Would Be Worth Today 

No Hope In Sight: Bank of America is calling for minimal quarter-over-quarter revenue growth in the fourth quarter, and Didora said investors should expect core cruise spend to remain down roughly 86% for the foreseeable future.

Bank of America has the following ratings and price targets for the major cruise stocks:

• Royal Caribbean, Underperform rating, $34 target.
• Carnival, Neutral rating, $18 target.
• Norwegian, Neutral rating, $16 target.

Benzinga’s Take: Cruise stocks could get a boost when investors are convinced that there will be no more delays in restarting the cruise industry. A widespread coronavirus vaccine will also likely be a major catalyst. However, the ultimate fate of the industry will be how long it takes demand to recover and whether or not the pandemic has permanently changed consumer demand.