Norwegian Cruise Line Holdings (NCLH -0.41%) has been hammered this year by the coronavirus pandemic, with all 28 of its ships forced to remain in port. Its stock has not been able to tread water and is down more than 72% year to date, making for some rough sailing for investors.
But if you had invested $1,000 in the cruise operator's IPO back in 2013, how would you be faring today? Let's take a closer look at what would have happened over the last seven and a half years and whether your investment would be stuck in the doldrums.
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Full steam ahead
Norwegian Cruise Lines breached the markets on Jan. 17, 2013 at a price of $24.19 per share, giving it a market value of $3.8 billion amid a lot of bullish sentiment for the cruise industry.
Yet it was the smallest of the three major cruise line operators behind industry giant Carnival with a $29.7 billion market cap, and Royal Caribbean, which was valued at $8.3 billion.
Norwegian also entered the public sphere with far fewer ships to its name than its peers, but it has managed to grow its fleet much faster, expanding the number of ships by 154% in just over seven years compared to 5% growth by Carnival and a 59% increase by Royal Caribbean.
Still, that expansion put a heavy anchor of debt around its finances. Norwegian was already laden at its IPO with $3 billion in long-term debt, and that has now mushroomed to over $10 billion at the end of the second quarter. Ratings agency Moody's sees that burden giving it little room to maneuver for at least the next two years.
What a difference nine months make
However, Norwegian Cruise Lines has done well for itself since going public. Although it reached an all-time high of over $63 a share within two years and fluctuated afterwards, it entered 2020 trading around $58 a share.
That means if you had invested $1,000 in Norwegian in 2013, you would have received 41 shares and in January they would have been worth over $2,390, a 135% gain or so, for a compounded annual growth rate of 13.4%. In fact, it was enough to beat the S&P 500, which was up 118% over that same time frame.
Unfortunately, the COVID-19 pandemic began right around that time and Norwegian Cruise Lines -- and all of the other cruise ship operators -- sank like a rock. Its stock hit a low of $7 per share in mid-March, and though it surged 137% in the months following, Norwegian Cruise Line's stock is only trading around $16.50 per share.
That means your $1,000 invested over seven years ago would only be worth about $670 today, a loss of 33%.
Set sail for growth
Norwegian and the other cruise ship operators ought to be setting sail again soon, and Norwegian has said its bookings for 2021 are doing better than expected, albeit below historic volumes as social distancing rules and consumer hesitancy impact rates.
It will be some slow growth until life on the high seas normalizes, but investors may want to consider starting a position at these depressed prices, or even adding to their existing positions. Analysts see the industry at an "inflection point," and there remains a lot of upside ahead, even if it will take some time to achieve it.
