Cruise Companies Navigate Uncertainties

Cruise Companies Navigate Uncertainties

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Royal Caribbean Cruises (RCL), the world's second largest cruise company, rallied 8.03% this week after posting better than expected earnings. Strong vacation bookings are keeping the company afloat despite headwinds and earlier concerns about virus outbreaks on board.

Investing in cruise ships is a play on economic recovery, especially in the Meditteranean, but investing in entertainment is always risky. Are cruise ships still a prime destination for your next vay-cay? The Costa Concordia disaster that inflicted Carnival (CCL) is sinking from collective memory but this year's "poop cruise" still stains our outlook on cruising. 

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Major headlines and safety concerns are mainly problematic for Carnival. But that doesn't mean consumers are more likely to book a cruise at a different company. Carnival rose 3.98% on Thursday nevertheless. 

Norwegian Cruise Line Holdings (NCLH) debuted its share earlier this year and is a bit of a dark horse in this industry. Its shares rose 4.01% on Thursday. The company has a slightly different cruising model focused on younger vacationers and a newer fleet.

That leaves Royal Caribbean, which is working hard to navigate a position between these other cruise lines. Despite the generous quarter, the future isn't exceptionally bright. For RCL, maintaining its position is going to come at higher cost and any growth will be uncertain and slow. RCL is forecasting increasing capital expenditures to keep its fleet up to date and continuing a rigourous marketing presence.

Something still smells fishy about the rally given the many uncertainties ahead. Here's the list of cruise ship companies, do you think any of these names are  truly deserving of their recent rally?:

 

1. Royal Caribbean Cruises Ltd. (RCL, Earnings, Analysts, Financials): Operates in the cruise vacation industry worldwide. Market cap at $7.52B, most recent closing price at $34.29.
 

 

2. Carnival Corporation (CCL, Earnings, Analysts, Financials): Operates as a cruise and vacation company. Market cap at $25.84B, most recent closing price at $33.32.
 

 

3. Norwegian Cruise Line Holdings (NCLH, Earnings, Analysts, Financials): Offers cruises worldwide with varying itineraries. market cap at $6.13B, most recent closing price at $28.90.


 

 

–Freda Ding

 

 

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