Shares of Norwegian Cruise Line Holdings Ltd(NYSE:NCLH) stock gained 14.42% and the price closed at $13.09 on Tuesday following a press release by the company that gave investors some clarity on its finances after it withdrew it’s forecasts for the year earlier this week due pandemic-induced hold on all voyages until the 1stof July.
Is NCLH a buy?
In a move to maintain liquidity, the company secured a new credit line of $675 million to go along with its existing $875 million credit line. The company has since completely drawn on both lines for a total of $1.55 billion borrowed. As of 31stMarch, the company had $1.8 billion of tickets sold, net of $850 million worth of cancellations.(BTN)
The coronavirus has had a devastating and unprecedented impact on the travel and entertainment sectors, especially cruise operators and aviation. Since the cruise line industry is highly capital intensive and high on operating costs, investors are naturally very skeptic of the future of the industry. The stock has fallen 77% off it’s 2020 high of $59 to just $13.
The Tuesday press release gave rattled investors clarity on the financial strength and liquidity position of the company, but also reported an expected loss for the current and next quarter. The company expects to burn between $70 million and $110 million a month till end of June, after which they expect to resume operations. The company is also reducing $545 million of planned capital expenditure till 2021(Nasdaq). As part of their COVID action plan, the company will be suspending retirement and savings contributions, reducing pay and work hours, freezing hiring and cutting miscellaneous operating expenses.
How much cash NCLH have?
The reported cash on hand of $1.4 billion, which gave investors a sigh of relief as it means the company has enough cash to last the entire of 2020 if the crisis continued (Motley Fool). The market expects the cruise industry to make a long slow recovery due skepticism of people to socialize in close proximity, possible quarantine requirements by governments after international travel and a sharp decrease in disposable income due to the bad economic scenario.
In a statement to Reuters, Norwegian Cruises CEO, Frank Del Rio stated, “We believe the disruption to the travel industry, while swift and severe, will eventually subside.”