Wolfe Research is bullish on cruise stocks this summer
The cruise industry is attracting investor attention this morning after some major updates. For one, Royal Caribbean Cruises Ltd (NYSE: RCL) is up 1.2% to $ 87.85 on its most recent review, despite CEO Michael Bayley announcing the company is postponing Odyssey’s inaugural cruise in July and a simulation cruise in June after eight crew members tested positive for Covid-19. Carnival Corp (NYSE: CCL), on the other hand, is adding routes to its Cunard fleet, which is now expected to resume operations on July 19th. On the most recent review, the security was up 1.4% to $ 29.01.
But perhaps more importantly, both Wolfe Research stocks were upgraded from peer performance to outperform. According to the analyst in the report, “early signs of customer demand for a return from a vacation at sea should make investors more optimistic about cruise stocks.”
Royal Caribbean stock has come a long way since hitting a 10-year low of $ 19.25 in 2020. The $ 100 level has proven elusive, however, as the latest attempt thwarted earlier this month so far returned a 5.6% loss in June. The good news is that the pullback has found support in the stock’s 40-day moving average.
RCL options are currently available for purchase at an absolute bargain. The Schaeffer’s Volatility Index (SVI) of 31% is in the extremely low 1st percentile of its 12-month range, which suggests that option players are currently pricing in low volatility expectations.
Carnival stock is in a very similar technical situation. The stock managed to soar from an all-time low of $ 7.80 in 2020 to an annual high of $ 31.52 on June 8. That’s comparatively lower than the $ 50 level CCL was at before the pandemic took its toll. However, the stock is getting support from its own 40-day moving average.
A shift in analyst sentiment could give CCL additional tailwind, with eight of the 14 lurking reports rated “hold” or worse. Additionally, equity appears ripe for a short squeeze as the 61.24 million shares sold represent 7.3% of the stock’s available float.