Article: Why Cruise Stocks Have Been Crushed

From thestreet.com. Some surprises. Didn't expect China to be blamed nor oversupply.

Shares of cruise line companies Royal Carribean (RCL - Get Report) , Carnival Corp. (CCL - Get Report) , and Norwegian Cruise Line Holdings (NCLH - Get Report) have all sunk this week, and analysts at Wolfe Research gave investors insight as to why on Friday.

Primarily, weakness in China is the "biggest issue" and has dragged down the companies this week.

"Cruise stocks haven't traded well in the past two days following a channel check note, disclosure of more ship removals from China and possibly less ships going into China, a Skift news article speculating China could take more control over cruising, and sell-side downward estimate revisions," Wolfe noted.

The weakness in China is "vitally" crucial for the long-term outlook of cruise stocks. "If China yields don't come back in a meaningful way next year then we become increasingly concerned about the longer-term," the analysts added.

However, because China is only 5% of the companies' global supply and with robust trends globally, the firm sees little risk to near-terms performances.

"We believe the four biggest challenges right now are 1) the travel ban to South Korea, 2) too much supply, too quickly, 3) poor distribution, and 4) an extreme consumer preference for new tonnage," Wolfe argued.

The firm is maintaining its "Outperform" ratings on both Royal Carribean and Carnival Cruise Lines.

"We remain bullish, and we think that near-term demand trends will remain strong, and we expect cruise line stocks to continue to climb the wall of worry," Wolfe said.

Thank you for sharing this.

Keith

I guess China can mostly be relied upon only as a supplier than a consumer.

Thanks for the info.

Sent from my iPhone using Forums

There's a US travel ban to South Korea?

There's a US travel ban to South Korea?

Korea.

China has a travel ban to South

Korea.

Ah, thank you.