Cruise Stocks Expect Tailwind Profits As Credit Card Travel Spending Runs Hot This Summer

Author: Piero Cingari | May 17, 2023 12:10pm

Carnival Corp. (NYSE:CCL), Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH), and Royal Caribbean Cruises Ltd. (NYSE:RCL) stand to benefit from an increase in spending in the coming months.

The trend should help these companies offset the losses they inherited from the Covid-19 outbreak.

What Happened: Credit card spending for cruise vacations has been on the upswing in recent months, according to Bank of America. That's in contrast to the demand for other travel categories that experienced a quicker post-pandemic recovery. Accommodations, for example, have already peaked.

Cruises had the biggest year-over-year and four-year increases in credit card spending in April, at 22% and 36%, respectively.

Spending momentum on cruises is also running hot. The six-month increase from October 2022 to April 2023 was 13%, as compared to a modest 2% increase in airlines and a 2% drop in lodging.

Altogether, cruises received 6.1% of total travel spending this year, beating the pre-pandemic share of 5.8% in 2019.

With summer just around the corner, the following quarters could see cruise lines surprise expectations in terms of revenues and earnings.

Why It Matters: Cruise-line stocks need a boost. They're still trading 40% to 80% lower than they were in early 2020 — right before the Covid-19 outbreak began.

The figure below shows the percentage change in cruise-line stocks since January 2020.

Royal Caribbean Cruises and Lindblad Expeditions Holdings Inc. (NASDAQ:LIND) have recouped nearly half of their post-Covid-19 losses. However, more indebted cruise lines such as Carnival Corporation and Norwegian Cruise Line are still not far from the lows reached in March 2020 when lockdown measures were put in place.

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