It is just a quirk of Wall Street. While some companies report record breaking quarterly revenues, the share price often drops sharply when the results don’t meet elevated expectations. Conversely, a company can seem to be at its lowest ebb, yet shares will get a boost following the earnings call as management makes reassuring noises that all will be fine… eventually.
Which brings us to Norwegian Cruise Line (NCLH). The cruise line operator reported its 2Q earnings last week and, surprising no one, the results were terrible.
In 2Q, Norwegian’s revenue came in 99% lower than the same period last year and still missed the estimates. At $16.93 million, the figure landed $6.24 million below the Street’s call. Naturally, the company missed on the bottom line, too, posting an EPS loss of $2.78, worse than the $-2.26 estimate.
However, after the earnings results, NCLH stock received a 4% bump in the following session. As Norwegian’s cruises were chained to the harbor for the full duration of the quarter, the results were expected. Essentially, investors were cheering Norwegian’s assertion it can survive COVID-19.
During the earnings call, the company confirmed it has raised an additional $1.5 billion from debt offerings, and said its current liquidity amounts to $2.3 billion in cash and equivalents – enough to see it through almost 16 months of total inactivity. NCLH also stated bookings for 2Q21 and beyond remain within historical levels.
However, looking ahead, Deutsche Bank analyst Chris Woronka has reservations. The uncertain future makes it hard to gauge how long it will actually be before any sense of normality resumes.
The analyst said, “Given that we are realistically no closer to knowing when NCLH and peers might be able to resume service, it’s difficult to extrapolate much from NCLH’s 2Q commentary. Opportunities to reduce cash burn appear to be inherently limited during the pause and we are a bit wary that some investors holding cruise stocks in anticipation of a post-COVID vaccine recovery trade may become impatient with the pace of service restoration (and thus with the pace of a return to profitability). There also remain any number of macro risks between now and then that have the potential to thwart the trajectory of the recovery.”
Woronka, therefore, keeps his Hold rating on NCLH as is, while the $15 price target stays put, too. (To watch Woronka’s track record, click here)
Overall, based on 6 Buys, 9 Holds and 1 Sell, NCLH has a Moderate Buy consensus rating. Over the next 12 months, the analysts forecast upside potential of 12%, as indicated by the $17.08 average price target. (See NCLH stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
