Given how well the cruise line industry is performing right now, figuring out which cruise stocks to buy, rather than cruise stocks to sell, may be what’s top of mind among more investors.
After all, cruise line stocks have surged in a big way since 2023, as the sector’s post-pandemic recovery gained momentum, resulting in massive improvements in revenue and profitability.
Industry forecasts call for cruise ship passenger levels to top pre-pandemic levels this year. Analysts like Wells Fargo’s (NYSE:WFC) Daniel Politzer anticipate the boom times to continue for the cruise industry into 2025. Nevertheless, it’s possible these bullish forecasts are hardly set in stone, but have become priced-in as near certainties.
That suggests taking some risk off the table by selling into strength or avoiding cruise stocks completely. Among the handful of cruise industry stocks, these three cruise stocks to sell stand out as names that could soon go from smooth sailing to troubled waters.
Carnival (CCL)
Carnival (NYSE:CCL) has surged by more than a third over the past 12 months, but shares in the Miami, Florida-based cruise line giant have yet to re-hit pre-COVID price levels.
As you may recall, CCL stock traded for nearly $50 per share right before the pandemic versus a stock price of around $15 per share today. However, even if this gap suggests further runway, that may not necessarily be the case. Analyst consensus may call for a return to full-year profitability in 2024, followed by an additional jump in earnings next year,
Even so, this forecast may hinge too heavily on trends like revenge travel and a resilient economy persisting into the coming year. Don’t forget that Carnival still needs to whittle down the high debt it took on to ride out the pandemic. That, too, could once again weigh on CCL’s performance.
OneSpaWorld Holdings (OSW)
OneSpaWorld Holdings (NASDAQ:OSW) operates health and wellness concessions on cruise ships. This company managed to survive suspended cruise operations during the lockdown period.
Last year, OneSpaWorld’s revenue came in at $794 million, up 45% year-over-year, above and beyond pre-2020 revenue levels. Its results have continued to come in strong, as seen in OSW’s latest quarterly earnings release. However, following a 40% surge for OSW stock over the past year, thanks to these strong results, it’s possible that shares have become richly priced.
OSW now trades for 16.9 times forward earnings. This valuation may not be sustainable. If something like an economic slowdown impacts cruise ship spending, future growth could come in at far lower levels than currently expected. As this may lead to a downward revision to OSW’s valuation, consider it one of the top cruise stocks to sell.
Viking Holdings (VIK)
Viking Holdings (NYSE:VIK) hasn’t been a public company for long. However, it has quickly attracted bullish sentiment from the market. VIK went public at $24 per share last month and has since climbed to around $30.
Yes, it makes sense that the market has enthusiastically bid up shares in this cruise operator, best known for its river cruises through Europe. In its first earnings release, the company reported 14.2% year-over-year revenue growth, with margins improving by around 19%.
Still, with bullish sentiment comes a premium valuation for VIK stock. Shares trade for 22.6 times forward earnings. Other cruise stocks sell at forward multiples in the mid-teens range. Much like with the other cruise stocks to sell, any hint of trouble for the sector could lead to a de-rating to the downside for shares. While VIK may be appealing on weakness, steer clear for now.
On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
