Cruise stocks Carnival Corp CCL, Royal Caribbean Cruises Ltd RCL and Norwegian Cruise Line Holdings Ltd NCLH are off to a hot start in 2022, but the latest data from Bank of America highlights just how much the omicron variant of COVID-19 has derailed the cruise industry's recovery in December.
What Happened? Bank of America analyst Andrew Didora reported Wednesday that core monthly spending on cruises using Bank of America credit card data was down 39.8% in December compared to 2019. That drop marked a break from the previous trend of month-by-month improvements in cruise spending declines on a two-year basis.
Spending in September, October and November was ramping higher, but still down 49.9%, 44% and 29.2% compared to 2019 levels, respectively.
Related Link: Is Carnival's Stock Overvalued Or Undervalued?
Why It's Important: The good news for cruise stock investors is that Didora estimates about 75% of the industry's total fleet was back in operation as of the end of 2021 after a total shutdown of the industry during the worst of the pandemic. The January numbers could be very important in determining how long the industry will be impacted by the omicron outbreak.
"Our cruise pricing survey shows ticket prices in 2023 are steady, with some pricing softness in 2022 likely given the continued variant headlines," Didora said.
Bank of America remains cautious on cruise stocks, given the uncertainty in the space and the debt the companies took on during the shutdowns. Didora has the following ratings and price targets for the major cruise stocks:
- Royal Caribbean: Underperform rating, $75 target.
- Carnival: Neutral rating, $24 target.
- Norwegian: Neutral rating, $27 target.
Benzinga's Take: The last thing cruise stock investors want to hear is that the extremely difficult environment is extending further into the future. The ultimate fate of the industry will be determined by how long it takes the leisure travel business to recover fully and whether or not the pandemic has permanently changed consumer demand.
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