Cruise Line Stocks Analysis


The Cruise Line industry has 3 main players: Carnival $CCL with about 48% of market share, Royal Caribbean $RCL with 22% of market share and Norwegian Cruise Lines $NCLH with 9% of market share. Carnival competes in all the categories, that is contemporary, premium and luxury while Norwegian is focused on Luxury and Contemporary and Royal Caribbean Contemporary and Premium. Carnival is more diversified and, therefore, has the lowest profit margin and is growing the slowest. Carnival also has the best balance sheet among the three and this is a good thing in the current times as it makes it easier for them to issue capital. They have been issuing capital with senior bonds and convertible bonds. All of these will lead to share dilution in the future. Royal Caribbean and Norwegian will also have to issue more debt in the future in order for them to survive but it will be worse for them because they don't have such a good balance sheet as Carnival. The capital expenditure of Carnival has been increasing in recent years but that's only because they are buying new ships. It came at the wrong time but in the long-term, it won't matter that much because 20 years from now, people will still be going on cruises. Even 5 years from now, they will be going. But at the current price, Carnival is still too expensive for me. Royal Caribbean is smaller, has less ships but has been growing faster than Carnival. If we look at the market cap, both companies have about the same. We can say that there is a premium on Royal Caribbean. Royal Caribbean will have to issue bonds or even shares to repay their debt. They are not getting a bailout as they are incorporated in Liberia. Carnival is incorporated in Panama. They are not getting a bailout from the US government. They will have to issue more debt and dilute their shares. Norwegian has an even worse balance sheet. If I have to choose between the 3, I'll choose Carnival. They have the highest probability of surviving but at current prices, it is not worth it. If you had invested $10 000 in American Airlines in 2012, you could have turned it into $1.6 million in just 5 years. This is the type of opportunity that can happen to the cruise lines but only at the right price and right now is not the right price. Watch the full video on YouTube and Subscribe: https://www.youtube.com/watch?v=77P4_gwhwgQ&list=UUPO3uUyoXSaFWG-Ldq1mqEQ You can find the full analysis on my research partnership: https://ishfaaqpeerally.teachable.com/courses/662813/lectures/15028542 Join my private investing group on Facebook for more: https://www.facebook.com/groups/IshfaaqInvesting/

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