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After the disruption of the COVID-19 pandemic, Norwegian Cruise Line Holdings Ltd. has reached an important point on its journey back to normal operations, analysts say.
The cruise operator reported a wider-than-expected fourth-quarter loss before market open Tuesday, although revenue was higher than forecast. Norwegian
NCLH,
says its affluent target customers are opening their wallets for travel both now and in the future.
During a conference call to discuss the results on Tuesday, Norwegian CEO Frank Del Rio said the company enters 2023 with strong bookings and pricing. “We ended the year on a record book position for 2023,” he said.
Norwegian’s results reflect a broader trend in consumer spending, according to Melius Research analyst Conor Cunningham. “The improvement in booking trends comes as consumers continue to shift spending habits back to services and away from goods,” he wrote in a note released Tuesday. “2022 was a year of transition as Norwegian set their operation to recapture demand as bookings normalized.”
Melius has a buy rating for Norwegian.
Related: After pandemic chaos, Norwegian Cruise Line CEO says consumers still ‘willing to spend on travel’
The company’s occupancy level was 87% in the fourth quarter and is expected to reach 100% in the first quarter. Occupancy is expected to return to historical levels in the second quarter, according to the cruise operator.
Norwegian’s 2023 capacity is expected to increase 19% compared with 2019, which includes the delivery of three new ships: Oceania Cruises’ Vista, Norwegian Viva and Regent’s Seven Seas Grandeur.
Overall, Norwegian expects to see a return to “normalized operations” in 2023, according to a presentation slide that accompanied the company’s fourth-quarter results.
The company’s stock tumbled following its results but rose 2.5% Thursday, outpacing the S&P 500’s
SPX,
gain of 0.6%. Norwegian’s stock has fallen 16.4% in the last 12 months, compared with the S&P 500’s drop of 8.9%.
Related: Norwegian Cruise stock drops after wider-than-expected loss, while revenue tops forecasts
“We still see significant upside in shares and would recommend investors start to revisit the [Norwegian Cruise Line] story given we believe they are now in a solid positive cash flow position,” said Stifel analyst Steven Wieczynski in a note on Tuesday. “What keeps us most encouraged is that long-term demand/bookings continue to be solid across all of their brands. This should allow the company to move into a material cash neutral/positive position and stay there as we move into [the second half of 2023].”
Stifel has a buy rating for Norwegian.
In a note released Wednesday, Macquarie Research analyst Paul Golding said that Norwegian is “almost back to normal” after the disruption of the pandemic. He also cited the company’s increased capacity. “Despite the capacity jump, the company ended ’22 in a record booked position with record prices,” he wrote.
The analyst also pointed to Norwegian’s improved liquidity of approximately $1.9 billion and said that fiscal 2024 appears poised for strong run-rate earnings. Macquarie has an outperform rating for Norwegian.
Of 16 analysts surveyed by FactSet, six have a buy rating, eight have a hold rating and two have a sell rating for Norwegian.
