Will it be smooth sailing for Norwegian Cruise Line (NYSE:NCLH) Line now that the company has wowed investors with its first-quarter 2023 results? I’ll dare to say that the answer is yes, and I’m bullish on NCLH stock because Norwegian Cruise Line’s current results and forward guidance point to a full year of strong bookings and pricing.
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Norwegian Cruise Line is among the best-known cruise line operators. The company was doing fairly well in 2019, but the onset of COVID-19 devastated Norwegian’s top and bottom-line results.
Today, Norwegian Cruise Line is working diligently to return to a “new normal” and possibly even pre-pandemic conditions. Yet, high inflation, international tensions, and recession jitters have put NCLH stock traders on edge. Could Norwegian’s latest round of data points get more investors on board in 2023?
Expectations Weren’t Great for Norwegian Cruise Line
Looking back through Norwegian Cruise Line’s earnings track record, we can quickly see that it’s not stellar. Norwegian’s quarterly EPS, in many cases, was -$1 or less. Amid that backdrop, few onlookers could have anticipated a favorable outcome in Q1 of this year.
Not only that, but Norwegian Cruise Line is undergoing a transitional period. Specifically, President and Chief Executive Officer Frank J. Del Rio is stepping down from those positions at Norwegian and is being replaced by Harry J. Sommer (though Del Rio plans to join the company’s board of directors in July).
C-suite transitions can cause uncertainty and friction, so this undoubtedly added to some financial traders’ anxiety in the days and hours leading up to Norwegian Cruise Line’s quarterly earnings release. Yet, the market is good at making fools out of as many speculators as possible, and low expectations can often lead to relief rallies of epic proportions.
A textbook example of this occurred today when Norwegian Cruise Line published its Q1-2023 results, and NCLH stock flew by 8.9%. This could mark a turning point as Norwegian stock has plenty of overhead room, and now, there’s the hope of the stock eventually reclaiming its pre-pandemic $60 level.
Who knows — maybe a new chief executive will infuse Norwegian Cruise Line with new life and fresh ideas. So, get your itinerary ready, as NCLH may embark on a trip to Recovery Land, where the passengers can party like it’s 2019.
Norwegian Cruise Line Sails Past Analysts’ Forecasts
I wish I could say that Norwegian Cruise Line swung from a net loss to a profit, but that’s not what happened. Still, it’s impressive that Norwegian posted a first-quarter 2023 adjusted net loss of $127.7 million or $0.30 per share. This represents a huge improvement over the year-earlier quarter’s adjusted net loss of $760.5 million or $1.82 per share. It’s also better than the quarterly EPS of -$0.42 that analysts had anticipated.
Here’s where it gets even better, though. Norwegian Cruise Line’s revenue soared from $521.9 million in the year-earlier quarter to $1.82 billion in Q1-2023. This 248.7% year-over-year sales acceleration is astounding, and it’s also worth noting that Norwegian’s quarterly revenue exceeded Wall Street’s estimate of $1.7 billion.
The company claims that its sales improvement can be attributed to the “phased ramp up of cruise voyages,” though I suspect that Americans’ penchant for spending money regardless of economic conditions played a part, as well.
Looking to the future, Norwegian Cruise Line raised its full-year 2023 EPS guidance from the previous estimate of $0.70 to “approximately $0.75.” Moreover, in a sure sign that cruise demand is robust, Norwegian’s “cumulative booked position for the remainder of 2023 continues to be at record levels and at higher pricing.”
Is NCLH Stock a Buy, According to Analysts?
Turning to Wall Street, NCLH is a Hold based on four Buys, five Holds, and two Sell ratings. The average Norwegian Cruise Line stock price target is $15.55, implying 6.95% upside potential.
Conclusion: Should You Consider NCLH Stock?
It’s risky to invest in any cruise company, including Norwegian Cruise Line. Any downturn in the economy could put negative pressure on Norwegian Cruise Line stock. Also, traders just bid up the Norwegian share price, and this might make contrarians reluctant to hit the “Buy” button.
So, it’s probably not a great idea to load the boat on NCLH stock. On the other hand, a small share position in Norwegian Cruise Line may not be a bad idea. After all, Norwegian’s surprisingly positive quarterly results and optimistic forward guidance indicate calm seas and, hopefully, some long-awaited relief for shareholders.
