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Norwegian Cruise Line Holdings Ltd NCLH

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Morningstar’s Analysis

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Cash Burn Likely to Peak in Fourth Quarter for Norwegian, With Net Profits Restored in Late 2022

Jaime M. Katz, CFA Senior Equity Analyst

Analyst Note

| Jaime M. Katz, CFA |

We don’t plan to materially alter our $30 fair value estimate for no-moat Norwegian Cruise Line Holdings after digesting third-quarter results and the firm’s updated prognosis for a return to profitability. We view the shares as modestly undervalued. In the third quarter, Norwegian burned $275 million per month in cash as it continued to ramp operations; this figure is set to climb to $350 million in the fourth quarter as the firm prepares to have 75% of its capacity running by year-end. Third-quarter gross revenue of $153 million and an adjusted loss per share of $2.17 are still well below the long-term normalized earnings power of the company, given that just 40% of capacity was sailing at the end of the period. Additionally, Norwegian offered a less sanguine outlook for 2022 than no-moat peer Royal Caribbean, calling for a return to profitability in the second half of 2022 rather than for the full year. This implies that 2022 EPS could still be negative, lower than our $0.80 projection.

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Company Profile

Business Description

Norwegian Cruise Line is the world's third- largest cruise company by berths (at nearly 60,000), operating 28 ships across three brands (Norwegian, Oceania, and Regent Seven Seas), offering both freestyle and luxury cruising. The company is set to have its entire fleet back in the water by April 1, 2022. Additionally, with nine passenger vessels on order among its brands through 2027 (representing 24,000 incremental berths), Norwegian is growing capacity faster than its peers, expanding its brand globally. Norwegian sails to more than 490 global destinations.

7665 Corporate Center Drive
Miami, FL, 33126
T +1 305 436-4000
Sector Consumer Cyclical
Industry Travel Services
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2019
Stock Type
Employees 34,300