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Why BofA Expects Norwegian, Royal Caribbean To Restart Cruises In Q4, Stage Near-Complete Rebound In 2021

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Why BofA Expects Norwegian, Royal Caribbean To Restart Cruises In Q4, Stage Near-Complete Rebound In 2021

Cruise companies Royal Caribbean Cruises (NYSE: RCL) and Norwegian Cruise Line Holdings (NYSE: NCLH) are inching toward a resumption of U.S. services after submitting a joint plan to the Centers for Disease Control, according to BofA Securities. 

The Cruise Line Analyst: Andrew Didora maintains an Underperform rating on Royal Caribbean with an unchanged $34 price target.

The analyst also maintains a Neutral rating on Norwegian Cruise with an unchanged $16 price target.

The Cruise Line Takeaways: Royal Caribbean and Norwegian's joint "Healthy Sail Panel" informed the CDC of its new safety standard strategy, marking the first step toward a resumption of U.S. cruises, Didora said in a Tuesday note. 

The document includes 74 health and safety measures that cover screening, onboard sanitation, destination planning and more, the analyst said.

Each consumer will need to confirm a negative COVID-19 test reading that was taken within five days of the cruise's departure, he said. 

If approved, cruises could sail from the U.S. in an "extremely limited form at some point" in the fourth quarter, Didora said.

The momentum should pick up in 2021, and both cruise operators should return to 85% of normal capacity levels by the end of 2021, the analyst said. 

Occupancy levels were left out of the Healthy Sail Panel's document beyond vague commentary on distancing guests from each other, he said, adding that the two cruise lines will need to submit company-specific safety plans to the CDC.

As a reference, Norwegian Cruise's management has already said it can break even on a shop-level basis at 40% of normalized levels, while EBITDA break-even requires 60% of normal net revenues, according to BofA. 

NCLH, RCL Price Action: Shares of Royal Caribbean were trading higher by 0.99% at $61.31 at last check Tuesday, while shares of Norwegian were up 0.13% at $15.01. 

Related Links:

Is Carnival's Stock A Buy After Resumption Of Cruises?

Norwegian Announces Pricing Of Its $250M Public Offering

Latest Ratings for NCLH

DateFirmActionFromTo
Sep 2020BarclaysUpgradesEqual-WeightOverweight
Aug 2020Morgan StanleyMaintainsUnderweight
Jul 2020SunTrust Robinson HumphreyDowngradesBuyHold

View More Analyst Ratings for NCLH
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