Cruise stocks: a risk vs. reward analysis
Investors understand that oil rates and terrorism, 2 things that truly can't be controlled, have a large influence on the stock market. Lots of financiers avoid airline stocks for this reason. They can't manage among their biggest costs (fuel) and an act of terrorism can seriously damage the market.
Why are cruise stocks any better? Increasing fuel costs and Hurricane Katrina led to lower stock prices for business like Carnival Corp. and Royal Caribbean Cruises Ltd. These 2 cruise lines represent about 75 percent of the cruise market, worldwide.
When George Allen Smith IV, from Connecticut, disappeared while on a Royal Caribbean cruise, the market received a great deal of negative promotion.
Certainly, there are numerous negatives for cruise stocks, however some financiers are bullish. Initially, there is no direct indicator that the vanishing honeymooner from Connecticut has harmed ticket prices. Evaluations on these stocks likewise look excellent.
Carnival Corp. trades at 16 times approximated 2006 profits; its historical variety is 10 to 30 times earnings. Royal Caribbean trades at 14 times approximated 2006 revenues; its historic range is 5 to 24 times earnings. Development potential is strong as just 4 percent of Americans have ever taken a cruise.
When considering cruise stocks, keep in mind the threats. A sharp rise in fuel costs or another terrorist attack would likely have a negative influence on cruise stocks. In my viewpoint the risk surpasses the possible reward as I don't expect cruise lines to considerably surpass the broader market.
These two cruise lines account for about 75 percent of the cruise market, worldwide.
When thinking about cruise stocks, keep in mind the risks. A sharp rise in fuel rates or another terrorist attack would likely have a negative effect on cruise stocks.