Norwegian Cruise Line Holdings Ltd. NCLH recently extended previously announced suspension of global cruise voyages owing to the coronavirus pandemic. Following the news, the company’s shares declined 12.4% in after-hour trading session. Moreover, year to date, the company’s shares have tanked 64.1%, compared with the industry’s decline of 42.3%.
The extension of suspension includes all voyages for Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises embarking between Aug 1 and Sep 30. However, cancellations exclude September Seattle-based Alaska voyages. Owing to travel and port restrictions, the company has cancelled select voyages through October 2020, including Canada and New England sailings.
The industry is witnessing dismal demand for cruise on account of the coronavirus-induced shutdowns. However, earlier the company had stated that demand for cruise beginning fourth-quarter 2020 and 2021 are on track with overall booked position and pricing for 2021 within historical ranges. The company continues to take future bookings for 2020, 2021 and 2022. Other major cruise operators like Carnival Corp. CCL and Royal Caribbean Group RCL have also been affected.
Enough Liquidity to Tide over Pandemic
Cash and cash equivalents as of Mar 31, 2020 were $1.4 billion, up from $252 million as of Dec 31, 2019. In an effort to raise nearly $2 billion, the company launched a series of capital markets transactions on May 5, 2020. As a result of high demand, oversubscription and the full exercise of options to purchase additional ordinary shares and exchangeable notes, the total amount of gross proceeds rose to roughly $2.4 billion. Following these transactions, the company’s total pro-forma liquidity is approximately $3.7 billion as of the first-quarter end.
After costs reductions and cash conservation measure, the company’s cash burn is expected between $120 million to $160 million per month. Although total debt at the end of Mar 31, 2020 was $8.6 billion, it is confident that with the amount of liquidity it holds can survive in a zero revenue scenario for 18 months.
Zacks Rank & A Key Pick
Norwegian Cruise Line has a Zacks Rank #4 (Sell). A better-ranked stock in the leisure space include Camping World Holdings, Inc. CWH, which carries a Zacks Rank # 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Camping World Holdings current year earnings is likely to witness a growth of 193.9%.
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Carnival Corporation (CCL) : Free Stock Analysis Report
Royal Caribbean Cruises Ltd. (RCL) : Free Stock Analysis Report
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Norwegian Cruise Line Holdings Ltd. (NCLH) : Free Stock Analysis Report
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