Last month was a rollercoaster for cruise liners. First, stock prices declined because of a fresh wave of infections in key European markets casting clouds over near-term demand recovery. Then came the recovery. In fact, Norwegian Cruise Line’s (NYSE:NCLH) stock jumped more than 10% just in the last 5 days, and nearly 25% since Sep 24. What now? How might the stock move over the next month, 3 months or a year? Turns out, the likelihood of upside is going to get stronger as the time passes. So this might be a good time to consider investment.
Analyzing past patterns in the stock’s movement, we find that there is nearly a 35% probability of Norwegian Cruise Line moving up another 10% over the next 21 trading days. The chances of moving down by -10% stand at 24%, suggesting 1.5x likelihood of upside compared to downside for this particular quantum of change. Over the next 3 months, this likelihood only gets stronger as our AI engine suggests that Norwegian is nearly 2.5x more likely to move up 10% in the next 3 months than it is likely to move down -10%. Our detailed dashboard highlights the chances of Norwegian Cruise Line’ stock rising or falling and should help you understand near-term return probabilities for different levels of movements. The underlying fundamentals also suggest an investment opportunity. Our dashboard Big Movers: Norwegian Cruise Line Moved 10.2% – What Next? lays this out.
Norwegian Cruise Line’s stock price decreased -70% this year, from $58.41 to $16.99, before moving 10.2% last week, and ending at $18.73. At the beginning of this year, Norwegian Cruise Line’s trailing 12 month P/S ratio was 1.94. This figure decreased -48% to 1.0, before ending at 1.11. That’s a massive decline but it was bound to happen due to the global shutdown in cruise operations – a government directive to reduce coronavirus infection risk. This holds true for its peers as well. A comparison suggests that compared to Norwegian Cruise Line’s P/S multiple of 1.11, the figure for its peers CCL and RCL stands at 0.84 and 1.93 respectively. The market is rewarding Royal Caribbean more, but it would be hard to expect Norwegian’s multiple to improve until a clearer demand picture emerges.
Now let’s check the underlying growth. Norwegian Cruise Line’s revenue has increased 19.8% from $5,396 Mil in 2017 to $6,462 Mil in 2019. For the last 12 months, this figure stood at $4,658 Mil, implying a decrease of -28% over 2019 numbers. As far as the profitability goes, Norwegian Cruise Line’s net margins have hovered between 14% and 16% in the last few years, before plummeting to -43.5% in the last 12 months as operations stopped. It is not hard to see that before Covid-19, the cruise line operator was growing consistently while maintaining profitability. We see no reason why it cannot get back on the same trajectory once the demand rebounds. With that in mind, the current momentum could be a signal for market entry for investors.
Taking all perspectives together, Norwegian looks like a reasonable bet. But what if you wanted a more balanced portfolio? Here’s a high quality portfolio to beat the market, with over 100% return since 2016, versus 55% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently.
See all Trefis Price Estimates and Download Trefis Data here
What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For CFOs and Finance Teams | Product, R&D, and Marketing Teams
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.