Norwegian Cruise Line Stock To $16?

Our multi-factor assessment suggests that it may be time to sell NCLH stock. We have, overall, a pessimistic view of the stock, and a price of $16 may not be out of reach. We believe there are several things to fear in NCLH stock given its overall Weak operating performance and financial condition. Hence, despite its Moderate valuation, this makes the stock look Risky.

Below is our assessment:

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Let’s get into details of each of the assessed factors but before that, for quick background: With $11 Bil in market cap, Norwegian Cruise Line is a global cruise company offering travel experiences through 28 ships and multiple sales channels, including retail, travel advisors, and onboard sales.

[1] Valuation Looks Moderate

This table highlights how NCLH is valued vs broader market. For more details see: NCLH Valuation Ratios

[2] Growth Is Moderate

• Norwegian Cruise Line has seen its top line grow at an average rate of 43.8% over the last 3 years
• Its revenues have grown 3.6% from $9.4 Bil to $9.7 Bil in the last 12 months
• Also, its quarterly revenues grew 4.7% to $2.9 Bil in the most recent quarter from $2.8 Bil a year ago.

This table highlights how NCLH is growing vs broader market. For more details see: NCLH Revenue Comparison

[3] Profitability Appears Moderate

• NCLH last 12 month operating income was $1.6 Bil representing operating margin of 16.4%
• With cash flow margin of 20.9%, it generated nearly $2.0 Bil in operating cash flow over this period
• For the same period, NCLH generated nearly $664 Mil in net income, suggesting net margin of about 6.8%

This table highlights how NCLH profitability vs broader market. For more details see: NCLH Operating Income Comparison

[4] Financial Stability Looks Very Weak

• NCLH Debt was $15 Bil at the end of the most recent quarter, while its current Market Cap is $11 Bil. This implies Debt-to-Equity Ratio of 136.8%
• NCLH Cash (including cash equivalents) makes up $167 Mil of $22 Bil in total Assets. This yields a Cash-to-Assets Ratio of 0.8%

[5] Downturn Resilience Is Very Weak

NCLH has fared much worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• NCLH stock fell 69.2% from a high of $33.71 on 8 June 2021 to $10.38 on 16 June 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $29.07 on 30 January 2025 , and currently trades at $23.49

 
2020 Covid Pandemic

• NCLH stock fell 87.0% from a high of $59.65 on 17 January 2020 to $7.77 on 18 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read NCLH Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

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