Cruise Prices Are Falling: Is It Still Too Early To Buy Carnival, Royal Caribbean & Norwegian Stock?

Cruise stock investors haven’t gotten the rebound they were hoping for in 2022 on the heels of a horrendous 2020 and 2021.

Unfortunately, Bank of America analyst Andrew Didora said Wednesday that 2023 is now looking like an increasingly difficult environment for Carnival Corp. CCL, Royal Caribbean Cruises Ltd RCL and Norwegian Cruise Line Holdings Ltd. NCLH as well.

Recovery Timeline Extended: The ongoing cruise pricing weakness that investors were hoping would be confined to the first half of 2022 is now expanding into 2023 and 2024.

Related Link: Why This Cruise Stock Analyst Is Cutting Price Targets Following Carnival Debt Offering

“We view this as more specific to the cruise industry than a larger read to the leisure consumer given further COVID pressures (testing still required), continued ramp up in cruise capacity, and likely some difficulty attracting the 'new to cruise' consumer,” Didora said.

In May, Carnival prices took the biggest hit of the big three cruise stocks, with prices declining 2.6% compared to November for all time periods. Didora said Carnival pricing weakness isn’t particularly surprising given the company’s exposure to Europe, which has been particularly weak due to COVID-19 restrictions and the war in Ukraine.

Royal Caribbean prices dropped 1.2% in May following a 3.6% increase in April. Norwegian prices dropped 1.3% month-over-month in May, and have now fallen for five consecutive months, according to Bank of America.

Norwegian led the 2023 price declines with a 4.6% drop in May. Didora said Carnival cut its 2023 prices by 2.6% on average, while Royal Caribbean cut its 2023 prices by 2.4%.

Didora said the silver lining for cruise stock investors is that social media sentiment surrounding cruises has remained relatively stable.

How To Play It: At this point, Didora remains cautious on the cruise stocks as a group. Bank of America has the following ratings and price targets for the big three:

• Carnival: Neutral rating and $18 target.
• Norwegian: Neutral rating and $20 target.
• Royal Caribbean: Underperform rating and $57 target.

Benzinga’s Take: The last thing cruise stock investors want to hear is that the extremely difficult environment is extending further into the future. The ultimate fate of the industry will be determined by how long it takes the leisure travel business to recover fully and whether or not the pandemic has permanently changed consumer demand.

Photo: Oasis of the Seas in Nassau, Bahamas, courtesy of Wikipedia