Cruise Pioneers on Course for Success: Shares of Carnival, Royal Caribbean, and Norwegian on the Rise

In a surprising surge, cruise line stocks have recorded significant gains this week. According to observations by S&P Global Market Intelligence, the stocks of Carnival, Royal Caribbean, and Norwegian Cruise Line rose by 12.9%, 8.3%, and 14%, respectively. These positive developments come after the cruise industry suffered greatly from the COVID-19 pandemic but has made concerted efforts to reduce its debt over the last two years. The unquenched desire for travel and new experiences has led to strong demand for cruises, despite high oil prices and rising interest rates in recent years. This week, the positive outlook for the cruise industry was further highlighted when a Citigroup analyst upgraded the entire sector rating and optimistically revised the price targets upwards for all three companies. Citigroup analyst James Hardiman sees the potential for profitable growth and continued robust debt reduction in each of the three companies. Particularly, Carnival experienced an upgrade in its corporate debt by rating agencies and anticipates even more profitable growth opportunities with the introduction of its new private island, Celebration Key. Hardiman also sees positive developments for Royal Caribbean and Norwegian. Royal Caribbean is considered the least indebted company of the three and plans significant capacity and profit increases for the coming year. Meanwhile, Norwegian has shifted its focus towards stronger cost control, positioning the company well for future bottom-line growth. Overall, the potential for a growth-strong scenario remains, provided the economy stays stable. However, investors should note the existing debt of the companies in relation to their EBITDA. An economic downturn or rising oil and interest rates could reduce profits. Therefore, cruise stocks are primarily suitable for more risk-tolerant investors speculating on high returns.