Cruise stocks got crushed on Friday in response to a cautious note from Wall Street. Bank of America published a warning on the cruise lines, owing to negative ocean market pricing worries. In their latest monthly survey, analysts observed “modest softness” in the ocean market in the early part of this month compared with May, sending shares of Viking Holdings (NYSE: VIK), Carnival Corporation (NYSE: CCL), Norwegian Cruise Line Holdings (NYSE: NCLH) and Royal Caribbean Group (NYSE: RCL) reeling between 6% and 7% each.
In June, 40% of cruise itineraries contained softer pricing on a sequential basis vs. a lesser 33% in May. The latest pricing weakness still pales in comparison to March, when it was evident in 60% of itineraries. On the flip side, nearly one-third of cruise itineraries showed positive pricing growth in early June sequentially while pricing was flat in just over one-quarter of reservations. Most cruises are booked between Q4 and Q1 of any given year, and pricing fluctuations occur across room types including inside, balcony, ocean view and suite.
The only sailings that showed an increase in pricing for early June were those cruising the Eastern Caribbean, such as Barbados, Nassau and Grand Cayman, where prices inched higher by an average of 8% across room types. The pricing increase was overdue, representing the first of its kind since February. Meanwhile, room pricing in Western Caribbean markets declined by 6% in early June sequentially, the single-worst-performing region in Bank of America’s survey.
Alaskan cruises, a traditionally strong market, held their own, with market pricing declining by a modest 1%. Carnival Corporation and Norwegian Cruise Line Holdings both experienced positive pricing in The Last Frontier, including gains of 5% and 4%, respectively.
Viking’s Pricing Resilience
Bank of America analysts recently added Viking’s pricing to the fray for the first time, observing that there was less volatility in its pricing compared with its larger ocean-market peers. In early June, nearly two-thirds of Viking’s itineraries showed flat pricing compared with May. Meanwhile, cruise pricing fell in 26% of Viking’s itineraries while rising in 15% of them. While that did little to shield the stock from the selling pressure, shares have advanced by 30% since the company’s recent IPO, so investors are still ahead.
Should You Buy Cruise Line Stocks Today?
Cruise line stocks are a complicated story. On the plus side, there’s been a rebound in the travel industry since the pandemic, as a result of which bookings are solid. But on the negative side, cruise companies are riddled with debt since Covid, as it was their only way of survival while their ships were sidelined. Carnival Corp stock has shaved 18% off its value so far this year after trading like a rock star last year with a 70% increase in Q2 2023.
Wall Street analysts mostly suggest holding Norwegian Cruise Line Holdings but are bullish on Royal Caribbean, which has earned a “strong buy.” Meanwhile, Viking is a favorite owing in part to its ability to differentiate itself from the pack including its focus on adults rather than kids. If you’re willing to endure some choppiness in water market pricing as well as in stock prices, you might find buying opportunities in this sector this year.
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