Cruising along...🚢
One sector that was beaten down the most during the pandemic was the cruise lines. Well, leisure and travel as a whole took a major hit but, while the airlines and hospitality have picked up the pace of recoveries, cruise lines have been a slow mover in this category.
The Macro 🌎
We’ve seen that goods spending had declined precipitously over the last few months while, services spending has started to recover. This is in fact one of the issues the Fed is trying to tackle now. But, it still remains a fast-growing category with travel and leisure spending outpacing overall services spend.
In terms of employment as well, leisure and hospitality employment has been one of the fastest growing line items as reported by the BLS and is projected to grow further.
As for the larger leisure and hospitality sector, the price performance still remains below the overall market. ⤵
But, analysts are pricing in a recovery for 2023 and 2024. ⤵
Furthermore, the performance of the cruise lines still has a long way to go when compared to the rest of the Leisure and Hospitality Industry. However, there are flows coming into these names now and it’s probably worth looking at the industry and whether the companies are worth buying at this point. We look at:
âš Before we get into it however, I would like to caution you that this is still a very volatile industry and recovery may take a considerable amount of time - over a year. During this time, we might still see volatile price swings considering the US and Global macro slowdown and the stress on the consumer.
âš These companies are also highly cyclical, heavy capex users and debt laden, so with the cost of capital going up, there will be pressure on the companies. And please bear in mind, these are just ideas, and you should manage your own risk.
Read on for the rest of the investment thesis for this sector and which of the three companies come up on top.