What happened
Shares of Norwegian Cruise (NCLH 0.66%) surged 30.5% in February, according to data provided by S&P Global Market Intelligence.
The cruise company's stock is trading at a one-year high but is still around 50% below its pre-pandemic level of around $58 back in January last year.
Image source: Getty Images.
So what
Norwegian Cruise announced a downbeat set of earnings for the full fiscal year 2020, as the pandemic wreaked havoc on the cruise industry as sailings had to be halted until further notice. Revenue plunged by 80% year over year to $1.28 billion from $6.46 billion, and the company reported an operating loss of $3.5 billion, reversing the operating income of $1.2 billion in the prior year. Norwegian Cruise chalked up a huge net loss of $4 billion, though this included a $1.6 billion impairment charge.
Facing one of its toughest crises in the company's history, the company is hunkering down for a long winter while it waits for countries to reopen their borders and for travel to be permitted once again. The good news is that Norwegian Cruises is well-equipped to ride through this crisis as it has managed to raise approximately $6.5 billion from multiple sources since the onset of the pandemic, ending the year with $3.3 billion in cash and cash equivalents. With a cash burn rate of around $190 million per month, the company still has around 17 months' worth of cash, plus it can also continue to raise money through the issuance of more debt and stock if need be.
Now what
Investors, however, are looking past this set of poor results and are buoyed by good news surrounding the COVID-19 vaccines. With the vaccines being disseminated around the world and administered to those who need them the most, it's a matter of time before infection rates plunge and countries feel safe enough to resume normal activities. The company is seeing strong pent-up demand for future cruises, with bookings for the first half of 2022 exceeding the record levels back in 2019.
Norwegian Cruises may need much more time to return to growth again, but at least there's now a glimmer of hope that this harsh winter may soon be ending. Investors need to keep the faith with the company as it executes its medium-term recovery plan and readies itself for business next year.
