Are Cruise Lines Finally Sailing Toward Good Times?

With the worst of the Covid-19 pandemic now behind us, life continues to slowly return to normal. A shift in consumer preferences for experiences over material goods would be a natural side effect in the aftermath of a pandemic. Consumers can take advantage of relaxed travel guidelines and catch up on missed vacations, family gatherings and other experiences.

These experiences include cruising. A cruise can be a great way for friends and families to spend time together and travel to new places.

On Monday, Carnival Corp. (CCL) sailed to a 13.98% gain after upgrades from JPMorgan and Bank of America. Bank of America raised its price target for Carnival from $11 to $20, with analyst Andrew Didora stating that “the cruise recovery is now stable.”

The charts agree with Didora. Carnival has just broken out of a massive consolidation pattern on nearly four times its average volume (black arrow). Monday’s volume was the highest for the stock since last October, a signal that institutions may be buying. On Monday, Carnival closed at a new 52-week high.

Source: TradeStation

The bullish rounded bottom pattern (curved black line) has been forming for over a year and projects the stock to the $20 area. Carnival is trading well above its 50-day (blue) and 200-day (red) moving averages after struggling to rise above those key indicators since the early days of the pandemic.

Carnival is not the only name in this industry that is making waves. Royal Caribbean Cruises (RCL) also closed at a 52-week high on Monday. Royal Caribbean has gained 89.3% year to date.

Source: TradeStation

Norwegian Cruise Line Holdings (NCLH) is the laggard of the group, but that stock may be on the edge of a breakout. Norwegian needs to close above nearby resistance at $18.67 (black dotted line) to reach a new 52-week high.

Source: TradeStation

How would a recession affect the recovery in the cruise industry? Some surveys place the odds of a recession within the next 12 months at higher than 70%.

Source: Ycharts

While it is something of a stereotype that older Americans are more likely to take cruises, it remains a key demographic for the industry. Retired folks are among the least likely to be impacted by a recession, and many have the available capital and leisure time needed to take a cruise.

This doesn’t make the cruise industry recession-proof, but it does mean that companies such as Carnival are well-positioned to handle an economic downturn. Carnival is scheduled to report earnings prior to the opening bell on Monday, June 26.