Why shares of Royal Caribbean, Carnival Corporation and Norwegian Cruise Line Holdings fell again on Wednesday
Cruise industry stocks had another rough day. In Wednesday’s trading, shares of Norwegian Cruise Line Holdings ( NCLH -2.62% ) closed 3% lower, carnival society (CCL -1.11% ) fell 3.1%, and Royal Caribbean (RCL -1.70% ) — the only cruise line that performed better yesterday – did the worst of all today, losing 3.9%.
Indeed, during the day, Royal Caribbean has been consistently underperforming, even falling more than 5% at one point.
So what is the cruise industry suffering from this time around? Simply put: cash flow.
Compiling the latest financial results released by the three major publicly traded cruise lines this morning, the industry news site CruiseIndustryNews.com (CIN) broke down current “cash burn” rates — negative free cash flow — for each action. Here’s how much they burn at the last count:
- Carnival Corporation, the largest cruise line, is burning the most – $530 million a month.
- Royal Caribbean ranks second in terms of fleet size and cash burn: around $270 million per month.
- And bringing up the rear, Norwegian Cruise Line is burning $175 million a month.
CIN points out that Carnival’s situation is not as bad as it looks. Carnival may be burning the most cash, but that’s mainly because it operates the most ships. In fact, the smallest Norwegian Cruise Line, the website observes, actually spends the most money by ship while these vessels are laid up in port.
Yet, while there are minor variations between companies, the overarching fact is this: industry-wide, these three companies alone spend close to $1 billion a month in cash on moment, with no income to offset their costs. And they’re going to have to keep burning that money for months, until they finally get clearance from the Centers for Disease Control and Prevention. resume passenger transport to the sea.
This, in a nutshell, is why investors are unhappy with cruise stocks today.
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