“It’s too early to speculate on cruise stocks. Your domestic ships won’t start sailing again until December at the earliest, and I think there’s a good chance they’ll be postponed again,” the said “Bad money” Host said.
“If you really want cruise exposure, I say be patient because days like today make me believe you’re getting better buying opportunities,” added Cramer after a trading session Tuesday saw all three major operators see how their stocks were hammered.
Driving the sell-off was news royal caribbean raised fresh capital, said Cramer. The company announced that it is issuing $ 500 million of shares in a secondary offering and $ 500 million of senior convertible bonds.
“I say, what did you expect? The cruise lines need money. If you raise their stocks, as many younger, less informed investors continue to do, they will have to issue new equity. … You cannot afford this opportunity.” to be missed, “said Cramer.
For investors, however, Cramer insisted he believes Tuesday’s cruise stocks decline isn’t the right buy. For starters, he said it’s still not entirely clear when the companies will generate revenue by actually taking US customers on their travels, even though the companies are well run and appear to have solid bookings for 2021.
“It doesn’t matter how great Mardi Gras or Royal Caribbean or Norwegian could be. I mean the truth is they are banned from sailing right now because of the pandemic,” Cramer said. “Call me crazy, but I hate to recommend something that is legally prohibited from doing business. Why would you want to own stock in a company that can’t operate?”
Although the Centers for Disease Control and Prevention prohibit cruises expires at the end of this monthThe companies have further extended their service breaks, said Cramer. “So domestic cruises won’t be back until December at the earliest,” he said. “If we are still in the middle of a bad outbreak, I would expect them to be postponed again, regardless of what the government says.”
While operators will have improved security protocols upon their resumption, Cramer said potential investors need to keep an eye on companies’ balance sheets and their statements about future bookings.
And as of now, Royal Caribbean “looks like it’s the best, largely because of today’s capital increase,” Cramer said, pointing to great bookings for next year.
The host expressed concern about Carnival’s money burn, despite saying the company had “the best contact with the rest of the world which is already sailing again”.
Norwegian has taken a disciplined approach to cutting costs, which is a plus, Cramer said. On the other hand, he said the company had gone the longest of the trio without raising more capital. This means it could be prone to the big sell-off that Royal Caribbean saw on Tuesday should it decide to issue additional shares, according to Cramer.
He also warned young investors who see cruise lines as an opportunity to buy battered stocks at a discount even after they have recovered from the lows of the pandemic. “The cruise lines are not like a lot of the other stocks you play with,” he said. “They need money and are happy to take your money in the form of tickets or stocks.”
“There’s just not much you can do until you can sail safely,” added Cramer. “On the other hand, something can always go wrong.”