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Barclays: Cruise Stocks Poised to Set Sail Once Again

Barclays: Cruise Stocks Poised to Set Sail Once Again

By    |   Friday, 25 September 2020 09:16 AM

Barclays reportedly says it is time to buy cruise stocks, as pleasure lines hope to set sail again after a long halt due to the COVID-19 pandemic.

The Wall Street firm upgraded shares of Royal Caribbean Group (RCL), Carnival Corp. (CCL) and Norwegian Cruise Line Holdings Ltd. (NCLH) to overweight from equal weight on Friday, CNBC reported.

Major cruise lines such as Carnival and Royal Caribbean will require COVID-19 tests for guests and crew, as well as masks whenever social distancing isn’t possible, the latest steps toward getting the pandemic-crippled industry sailing again.

Brian Salerno, senior vice president of maritime police for trade group Cruise Lines International Association, announced the move earlier this week during a conference call with executives and journalists, Bloomberg said. The association represents Carnival, Royal Caribbean and Norwegian Cruise, among others.

The cruise industry has taken a major hit from the pandemic, with some of the earliest large clusters of COVID-19 occurring aboard cruise ships.

The CDC first issued a no-sail order on March 14 for all cruise ships and has been extending it since, Reuters said.

The companies are seeking a nod from the U.S. Centers for Disease Control and Prevention to return to sailing. The CDC “no sail” order that prevents the companies from sailing U.S. waters expires at the end of the month, but the federal agency has previously extended the order, Bloomberg said.

Cruise operators have lost about half to two-thirds of their value so far this year. Their shares were last down between 4% and 6% as worries of a second lockdown amid rising coronavirus cases shook broader markets.

Earlier this week, Royal Caribbean Group and Norwegian Cruise Line submitted a report to the U.S. Centers for Disease Control and Prevention (CDC) detailing health and safety protocols.

The cruise operators detailed 74 steps, including enhanced sanitation practices, controlling shore excursions and better protection for crew members, to protect guests once cruises resume.

Recommendations also include rigorous screening and testing before boarding and plans to address positive infection on board, the companies said.

“While we may be early, we believe the risk/reward is the most attractive in our coverage universe,” Barclays analyst Felicia Hendrix told clients. “Investors who have previously written off cruise stocks should begin to revisit their models.”

While Barclays said there a high probability the CDC will extend the no-sail date in the fourth quarter, the Wall Street firm believes “the comments from the agency will be positive and could signal a near-term return to cruise, which could be a catalyst for the shares,” said Hendrix.

“A 4Q20 start date combined with positive language bodes well for sentiment, as it removes uncertainty and importantly, concerns about liquidity,” added Hendrix.

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Barclays reportedly says it is time to buy cruise stocks, as pleasure lines hope to set sail again after a long halt due to the COVID-19 pandemic.
cruise, stocks, barclays, investors, buy
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2020-16-25
Friday, 25 September 2020 09:16 AM
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