Bull vs Bear: Norwegian Cruise Line (NCLH) After Earnings

0:00It's time now for the 360 round to discuss Norwegian cruise lines. Norwegian trading about 10% lower the day after posting a miss on revenue in the quarter and lower guidance. Growing tensions in the Middle East also have travel stocks under pressure this morning as well. Joining us to break all of this down, Ivan, fine set the senior partner and chief investment officer, director of research as well at Tigers Financial Partners and ASEA Georgiva, the CEO and founder at Infinity Research, great to have you both with us. Now Ivan, I see that you have maintained a strong buy despite the stock sell-off and the numbers that we got from Norwegian. What is the market missing about this quarter that makes you still constructive on this name? Well, first I think it was anticipated with the change in the CEO that we would probably get somewhat a kitchen sink quarter as far as guidance where they will bring down expectations. And they are also weighing on Norwegian and all the cruise stocks and even the airline stocks are the issue in Iran.

1:01So when we see geopolitical issues that could disrupt travel, all the travel stock sell-off, I think the majority of the sell-off is due more to that than specifically Norwegian. But Norwegian, they need to address cost and they need to address leverage and they are focused on doing that. They spoke this morning on the conference call about investing more into technology that will also be greater efficiencies and cost savings and improve the passenger experience. So I think that's positive. But the biggest positive on Norwegian, they have the youngest and most feature rich fleet and they are increasing their fleet significantly as a percentage of overall ships. So new ships, tracked cruisers, they also invested a ton of money in their private island,

2:03great stir up Kay. And you can see from the success that Royal Caribbean has had with their perfect day of Coco Kay and their ongoing investments in additional land-based destinations. This is the next phase of growth for the cruise industry. All right, Anasya, you're sort of on the other end of the spectrum here. You've been negative on your outlook for an Norwegian for more than a year here. Does this report reinforce your skepticism or has it changed your viewpoint at all? I would say that this report actually confirms some of the concerns that we had, including at Norwegian. In some more industry-wide concerns, for example, we have known that Alaska capacity is going up in 2026, actually at Norwegian it is not. But some of the other players that might be more of a disruptor are going into that market. So we are expecting 26 to have a tough Alaska season. On the other hand, Europe seems to be doing well. Brands, such as some of the carnival brands that have local presence and source locally

3:07see very strong pricing. In Norwegian, we were negative for a couple of reasons. During wave season of last year is when we really turned negative because of we track a voyages, about 38,000 voyages, including 3200 Norwegian brand voyages. So we could see that they were cutting price. And 2026 we have been calling as a transition year because they are realigning the fleet, especially in a Norwegian brand to where it should be. So to us, 26 was going to be toughs, structurally. So not a big surprise. I think the Caribbean at this point is widely known. In Europe, they are shortening the length of their voyages. But what they're doing is, despite reducing capacity in Europe, they will have about eight times the fleet in the seven-night Europe segment. So there might be a little bit of a problem with self-carnivalization there. We believe that today, and they probably low-bolt guidance, they could have done a lot better

4:09on the cost side of things, especially near-term. They had a lot of dry dog expense in Q1 of 25. They are basically saying that costs would be marginally down, despite really not having any dry dogs in Q1 of 26. And I would say it was a little surprising for the incoming CEO, who is a board member. He has been on the board for the past year, and before that had been there for about three years. For him to not show greater detail and grasp in terms of the business, I think he could have offered more today. And including the slightly better Q1, 26 guidance, again, both on the cost side. And our pricing works suggest that wave season is strong. I think management mentioned that there's no problem with the consumer. It's really execution that no we shouldn't. All right, and Ivan, I'd love to get your thoughts on that, too. Both on management's argument, the new CEO, that the strategy is sound.

5:11There's just some execution cleanup underway here. And also the visibility that was offered, or I guess it could make an argument lack there of, based on what Asya just said, that it seems deliberately lower than some of her checks. What are your thoughts there? Asya is right on several of her points. I think that is the new incoming CEO could have been a little more uplifting and positive. But look, he's taking a cautious approach. They're going to bring down expectations, why they kind of regroup and restructure. But the most important thing is that the consumer spending on travel, especially cruises is strong. When Royal reported a few weeks ago, I mean, their results were peppered with record, record, record, record. So, cruise demand is strong, and I think that will continue. The cruise industry is gaining share in the overall vacation market. It still offers consumers the best value for their travel dollar. And there's a lot of great product coming on the market, including the private island

6:14destinations. So, I'm looking forward to seeing Norwegians great stir up K. They just built a 28,000 foot square foot pool, more cabanas, more amenities. And they're investing in a water park. And this is another key area that the industry and the Norwegian is investing in. And it's from the success of Royal and great stir up K and their other land-based properties. It is attracting cruisers and it is paying off. So I think that the stock is depressed. It has Norwegian stock. It's depressed. It has trailed the peers. And I think that from that standpoint, there's a lot of upside in Norwegian. Yeah, still trailing its peers, the overall industry down on the full day today, but Norwegian suffering the greatest losses, down almost 11%. I want to thank both of you for that in-depth look at Norwegian's cruise lines earnings this morning. Ivan Feinseth, the senior partner chief investment officer and director of research at Tigers Financial Partners, and Asya Georgiva, the CEO and founder at Infinity Research.