Like most cruise line stocks, Norwegian Cruise Line Holdings (NCLH +3.20%) has continued to sail in smooth waters. The cruise line has benefited from high demand for cruise vacations. So far, occupancy numbers have remained high despite economic uncertainty, putting the company on a firmer financial footing, at least temporarily.
Unfortunately, the COVID-19 pandemic left the consumer discretionary stock vulnerable to a severe economic downturn, and rising debt levels could put the cruise line's finances into crisis.
Image source: The Motley Fool.
Why its debt is a problem
Norwegian holds $14.6 billion in total debt compared to its $2.2 billion in book value. In 2025, Norwegian was the only one of the publicly traded cruise lines to pay more in interest than in 2024.
To its credit, the company refinanced about $2 billion of its debt and extended maturities on some obligations due in 2027, reducing the amount of debt due in the near term. Moreover, investors should remember that it earned a profit in 2025 despite these challenges, indicating that high cruise demand is helping.
Unfortunately, Norwegian's debt has climbed continuously despite its improving financial conditions. This stands in contrast to its two larger peers, Carnival Corp. and Royal Caribbean, which have paid off some of the debts they accumulated during and just after the pandemic period.
The reason Norwegian has not paid off more debt is likely because 17 ships are on order between 2026 and 2037, including Norwegian Luna, which it launched in March. Assuming it can fill those ships, that investment could benefit the company.
NYSE: NCLH
Key Data Points
However, if the economy starts to affect cruise demand, Norwegian may again have to take on debt that it may not be able to afford just to stay in business.
That could happen if high fuel prices persist. According to Ship & Bunker, maritime fuel costs have risen 45% this year.
This is a problem because in 2025, Norwegian earned $423 million in net income in a year when it spent $676 million on fuel. A 45% increase takes that cost to $980 million. Had the company spent that amount on fuel last year, its profit would have fallen to $119 million, a 72% decline.
For now, fuel costs could be more of a short-term concern. Still, if those linger, it could ultimately worsen the debt problem and, eventually, alter the value proposition of Norwegian stock.
Moving forward with Norwegian stock
Investors should probably avoid Norwegian stock unless it can improve its debt situation.
Norwegian is not the only cruise line struggling with debt. However, its larger peers have reduced their debt burdens over time. Also, if a crisis such as an economic downturn or persistently high fuel costs hits Norwegian, it may not be able to fill the ships it plans to build over the next few years.
Ultimately, without better balance sheet stability, Norwegian could face an uncertain future if it has to deal with another serious crisis.
