Wolfe Research is bullish on cruise stocks this summer
The cruise industry is capturing investor attention this morning, following some key updates. For one, Royal Caribbean Cruises Ltd (NYSE:RCL) is up 1.2% at $87.85 at last check, despite CEO Michael Bayley announcing that the company was postponing Odyssey's inaugural July sailing, as well as a simulation cruise in June, after eight crew members tested positive for Covid-19. Carnival Corp (NYSE:CCL), on the other hand, is adding itineraries to its Cunard fleet, which is now expected to resume operations on July 19. At last check, the security was up 1.4% to trade at $29.01.
But perhaps more importantly, both stocks were upgraded to "outperform" from "peer perform" at Wolfe Research. Per the analyst in coverage, "early signs of customer demand for the return of vacations at sea should make investors more bullish on cruise stocks."
Royal Caribbean stock has come a long way since a 10-year low of $19.25 in 2020. The $100 level has proved elusive, though, with the latest attempt thwarted earlier this month yielding a 5.6% June loss thus far. The good news is the pullback has found support at the shares' 40-day moving average.
RCL options can be purchased for an absolute bargain at the moment. The stock's Schaeffer's Volatility Index (SVI) of 31% sits in the extremely low 1st percentile of its 12-month range, suggesting option players are pricing in low volatility expectations at the moment.
Carnival stock is in a very similar technical situation. The shares have managed to surge from an all-time low of $7.80 in 2020 to a June 8 annual high of $31.52. That is comparatively lower to the $50 level, which is where CCL stood before the pandemic took its toll. However, the equity has been getting support from its own 40-day moving average.
A shift in analyst sentiment could fuel additional tailwinds for CCL, with eight of the 14 in coverage carrying a tepid "hold" or worse rating. What's more, the equity looks ripe for a short squeeze, with the 61.24 million shares sold short accounting for 7.3% of the stock's available float.