Following the riveting tale and tragic conclusion of the Titan submersible, the renewed spotlight on the extreme tourism industry means investors should keep their eyes on Lindblad Expeditions (NASDAQ:LIND). While the company emphasizes distinct adventures as opposed to dangerous excursions, consumer jitters and regulatory concerns may affect sentiment. I am neutral on LIND stock.
LIND Stock Underperforms Its Closest Peers
Last week, LIND stock conspicuously underperformed its closest peers. During the aforementioned period, shares fell by 1.4%. In contrast, Norwegian Cruise Line (NYSE:NCLH) gained 1.4%. Also, shares of Royal Caribbean Cruises (NYSE:RCL) moved up 2.75%. Even Carnival (NYSE:CCL), which remained flat last week, still delivered a comparatively superior performance.
To be 100% clear, the fading share price of LIND stock does not necessarily signal a warning to exit now. Rather, the Titan disaster highlights the risks involved in traversing remote regions of the Earth. As well, prospective Lindblad clients may conduct a more thorough examination of potential vulnerabilities associated with unorthodox itineraries.
Again, it’s important to emphasize that Lindblad does not engage in extreme tourism to the point where serious injury or death may be a non-unreasonable possibility. Further, the concept of revenge travel – or the pent-up demand to engage in new experiences following the COVID-19 lockdowns – remains a powerful catalyst for travel-related investments, including LIND stock.
At the same time, Lindblad’s website advertises hiking into jungles, kayaking through fjords, or snorkeling with sea lions. And by the way, sea lions can be dangerous under certain conditions. Further, Lindblad offers trips to Antarctica or to the Amazon. While both regions don’t inherently pose acute risks – such as taking an experimental submersible to the Titanic wreckage – they’re not devoid of dangers either.
Consumers and Regulators May Take Another Look
All too often, both consumers and regulators get lulled into a sense of complacency regarding the safety of an underlying service until something happens. At that point, intense scrutiny may materialize, which may affect LIND stock.
On the consumer front, Lindblad’s journeys are anything but cheap. The company specializes in offering once-in-a-lifetime expeditions, meaning that clients must pay top dollar for the privilege. By logical deduction, Lindblad’s core age demographic likely tilts older since they had the most time to accumulate wealth.
Sure enough, one cruise industry resource notes that the median age of people traveling with Lindblad is 65. That’s hardly surprising. At the same time, older age typically corresponds with higher health risks. So, that trip to Antarctica presents much higher risks at 65 than it does at 25. If a medical emergency occurs, help may be far away (and expensive) in such remote regions.
As for regulations, the Titan tragedy will almost certainly spark greater scrutiny regarding extreme or unorthodox adventures. For example, when news broke about the loss of the submersible, the mainstream media began focusing on an awkward but pertinent question: which nation is ultimately responsible for the search and recovery costs?
To avoid future headaches, both private and public institutions may impose restrictions on these unique travel experiences.
A Delicate Financial Situation
From one angle, the Titan’s fatal expedition represented just about the most extreme experience an ordinary civilian can partake in. Therefore, the subsequent tragedy would seem to bear no influence on LIND stock. However, it’s also critical to realize that Lindblad operates under a delicate financial situation, attempting to recover from the pandemic. Put another way, it doesn’t need any bad news, directly or indirectly.
Yes, one can take encouragement that in the first quarter of 2023, Lindblad posted $143.4 million in revenue, up 111% from the year-ago quarter. Also, net income came out to $266.95 million, a far cry from the loss of $43 million in Q1 2022.
Nevertheless, free cash flow came in at a loss of $4.37 million in the most recent quarter. Since 2019, Lindblad, on an annual basis, has been printing red ink for this metric. Therefore, the Titan disaster may not be a direct headwind against LIND stock. However, it’s definitely not a tailwind at a time when Lindblad is seeking exactly that.
Is LIND Stock a Buy, According to Analysts?
Turning to Wall Street, LIND stock has a Moderate Buy consensus rating based on two Buys, zero Holds, and zero Sell ratings. The average LIND stock price target is $14.00, implying 38.1% upside potential.
The Takeaway: Keep Tabs on Sentiment for LIND Stock
Given the almost non-stop coverage of the Titan tragedy, a spotlight has now targeted the extreme travel industry. Subsequently, it’s possible that Lindblad’s core (vulnerable) customer demographic may rethink the company’s more remote – and presumably more profitable – excursions. While it’s not yet clear that this framework would be negative for LIND stock, it’s certainly not helpful.