Now is the fast recovery for cruise stocks coming?

D.he global corona lockdown last year hit most companies hard. One industry that got it particularly hard was tourism. Travel and hotel bookings had to be canceled en masse, with sales falling by more than 70 percent in some cases. The world’s largest travel group TUI, for example, had to almost completely cease its business from March 2020. Billions in losses were the result, and without government aid, many companies would have slipped into bankruptcy.

Like TUI, the big cruise companies Carnival Corporation and Royal Caribbean Cruises did. While cruises have become more and more popular over the past ten years and become more profitable for companies, a picture of horror emerged in the Corona year 2020: Most cruise ships stood still, crews were either sent home or emptied the ship on the seas around – to save expensive port fees. Likewise, ships were simply taken out of service overnight. Carnival had dumped almost 20 ships.

Anyone who really had the courage to invest in tourism shares immediately after the crash in spring 2020 was rewarded. The latter sentence can of course simply be written in retrospect and then, ideally, the whole thing can be booked under the stock market adage “Buy on bad news”. However, very few dared to implement this stock market wisdom in such a market situation. It was difficult to foresee what would happen to this industry and how things would go after Corona. Not least before the discussions about the environmental problems of the cruise industry, which had taken place well before Corona.

Investor courage has so far been rewarded

Ultimately, however, the result always proves you to be right: Shares in cruise companies have shown good price development over the past 12 months. Most notably number one in the business, Carnival, which has a 40 percent share of the cruise market. The share price has more than tripled since the crash to this day. The same picture emerges with the number two in the market, Royal Caribbean Cruises. With this share, an investor was able to turn 10,000 euros into more than 17,000 euros since the crash.

Is there more to it than that, to what extent does this story have further potential? The cruise industry should also get more tailwind again due to the planned easing of travel in many countries. So Carnival wants to start big again in its American home business from Florida and the European business with the German subsidiary Aida Cruises should slowly start again in the next few weeks. Competitor TUI with its Mein Schiff fleet is also already at the start. But it will take time until the pre-Corona level is reached. Before Corona, the industry had up to 30 million passengers a year. In 2020 there were less than a million worldwide. How attractive are the Mein-Schiff and Aida shares at the moment?

Tui share on the uptrend

After the Tui share (Mein Schiff) slumped by over 60 percent to 4.90 euros between mid-2018 and mid-2019, a catch-up movement of up to 8 euros followed by November 2019. In the wake of the outbreak of the corona pandemic, the next big sale started. The prices plummeted to 1.50 euros by March 2020. But until the beginning of June this year, the price was able to fight its way back up to the five-euro mark at times. The share is now trading well above the 200-day line, which means that the trend arrows are currently pointing upwards.

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To the detailed view

If the upward trend continues, the intermediate top from November 2019 at 8 euros should be targeted again in the coming months. Despite the currently promising chart technology, the Tui share is likely to have proven to be a long-term loss maker for the majority of shareholders. Over a 20-year perspective, investors will see price losses averaging ten percent annually.

Carnival is a turnaround bet

It doesn’t look much better at Carnival (Aida Cruises). The share of the market leader in cruises went back to the 2017 top at 59.90 euros and dropped to 36.60 euros by October 2019. After a short-term countermovement to 47 euros, the corona stock market crash between January and April 2020 caused a deep fall to a peak of seven euros. From this trough, however, the quotations have at times more than tripled again.

The share is currently trading around 40 percent above the 200-day line and is thus in a strong upward trend. If the price rally continues, theoretically up to the pre-crisis price level (January 2020 high: 47 euros) there would be further catch-up potential of almost 90 percent. As a turnaround bet, Carnival remains exciting. Long-term investors, on the other hand, have so far not given the title much joy. Because of the severe price setbacks in the meantime, the share posted price losses of an average of one percent per year over the past 20 years.

Sail away …

In conclusion, one could summarize that there is sure to be a silver lining for the industry in 2021. The latest price gains could only be a small foretaste of the scenario that could come when sales reach pre-Corona levels again due to continued successful vaccination campaigns.

These bare facts, in turn, are unlikely to prevent a real Mein Schiff or Aida fan from firstly going back on board and enjoying sailing and secondly – if they are shares-affine – perhaps (with a smile and a little Share position) to operate the “personal return on investment” and to partially finance the next cruises with price gains of your own favorite fleet.


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