Market Analysts Remain Positive Despite Cruise Stocks' Dive

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By The Maritime Executive 03-05-2020 06:29:00

With the impact of the coronavirus epidemic felt directly in every segment of the cruise industry, shares in the large publicly-traded cruise operators have tumbled even faster than the rest of the market. However, market analysts remain optimistic that the industry will rebound to its previous levels of activity and resume its growth. 

Over the past month, the Dow has shed 11 percent of its value, the Nasdaq Composite about nine percent and the S&P 500 about 10 percent. Cruise stocks have been particularly affected. Carnival Corporation's stock has fallen by more than a third over the same period, reaching levels not seen since the Great Recession in 2009. It dropped by 14 percent on Thursday alone, reflecting news of a second potential outbreak on a Carnival-owned Princess Cruises brand ship. 

Royal Caribbean stock fell by more than 40 percent over the same period, including a 16-percent drop on Thursday alone. The cruise operator's executives told investors last month that it is not possible to predict how the coronavirus epidemic will affect full-year earnings in 2020. 

Shares in the number-three publicly-listed operator, Norwegian Cruise Line, have lost nearly half their value over the past 30 days. The stock is now trading at levels last seen in the months after NCL's initial public offering in 2013.

However, Wall Street analysts are not fazed. The underlying long-term demand for cruising is strong, and most analysts have set target prices for cruise stocks at far above the current levels. 

“Despite the near- to medium-term overhang of COVID-19, we see value for patient investors,” J.P. Morgan analyst Joseph Greff wrote in a note to clients. Greff predicted that Royal Caribbean will be "best positioned to outperform coming out on the other side." 

Greff's price targets predict that Royal Caribbean and Norwegian Cruise Line stock prices will bounce back to more than double their current levels. The consensus price target for Carnival Corporation suggests that it will also bounce back to levels seen in late 2019.