These two cruise lines stand out above the rest, Susquehanna says
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Susquehanna Financial Group says that the cruise industry, which has been hard hit, should see demand rebound, but investors need to be cautious about choosing stocks. Positively, the industry has recovered. Liners plan to redeploy full-fleet fleets in the summer. They also have a clear line of sight toward profitability until 2023. As if battling a pandemic wasn’t enough, cruise ships (and airlines) will likely face a slower U.S. economy in the coming 6-12 months,” Christopher Stathoulopoulos, Susquehanna, wrote in a Thursday note. Stathoulopoulos stated that “We favor liners that can help reduce cyclical pressures, rising geopolitical danger” and added that they prefer lines that are equipped with features that will be able to mitigate these. Susquehanna began coverage on cruise lines that received positive ratings from Royal Caribbean Cruises or Norwegian Cruise Line. It also took a neutral position on Carnival. You can see Susquehanna’s ratings and price targets for those stocks. Also, the implied upside. Based on their track record of expanding capacity, Royal Caribbean is considered superior to Norwegian and Norwegian. Stathoulopoulos explained that RCLH and NCLH are preferred because of their pricing power (and also integrity), which is key in driving an increase in earnings. Stathoulopoulos added, “With supporting capacity and yield growth being key factors for a recovery and ensuring profitability,” Stathoulopoulos said. According to Stathoulopoulos, these cruise lines have a better position in terms of geopolitical instability and global demand. Stathoulopoulos explained that RCLH’s geographic exposure to North America is favorable, with 60 percent of their FY22 capacity being exposed to North America due the Russia-Ukraine war. The stock markets have all struggled to recover in 2022. Carnival has dropped more than 37% and Royal Caribbean by 31%. Norwegian’s share is around 28% less than the previous year. —CNBC’s Michael Bloom contributed reporting.
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