Norwegian Cruise LinesNCLH

Oil prices dropped more than 3 percent after comments suggested further military strikes in the Middle East are unlikely while negotiations continue. For a cruise operator like Norwegian, fuel is one of the largest single expenses. When the cost of oil stays lower, it directly reduces the cost of running the fleet and leaves more profit on every ticket sold.

Source: WSJ

Norwegian entered into credit agreements on October 27 to borrow up to $2.5 billion for each of two new ships. These vessels are scheduled for delivery in 2034 and 2036. The loans will cover 80 percent of the final payments for the ships and are insured by SACE, an Italian agency that helps finance large industrial projects.

While this adds to the company's already large debt, it is a routine part of its long-term expansion plan. By securing this funding now, the company ensures it can follow through on its strategy to grow its fleet with newer, more efficient ships that can earn higher profits per passenger.

Source: 8-K filing

Freedom Broker upgraded the stock to a Buy rating on Friday. This move comes shortly after Norwegian reported better-than-expected results and raised its profit outlook for the rest of the year.

The average analyst target for the stock now sits at $21, which is about 15 percent higher than the current price. While one major firm recently downgraded the stock due to worries about European travel, this upgrade suggests others see the company's cost-cutting and higher onboard spending as a path to better returns.

Source: Freedom Broker

Oil prices fell more than 4 percent on Monday as diplomatic talks between the U.S. and Iran eased concerns about supply disruptions in the Middle East. For a cruise operator like Norwegian, fuel is one of the largest single costs of running a fleet.

When the price of oil drops, it directly lowers the cost of powering ships, which leaves more profit on every ticket sold. This move reverses some of the price spikes seen last week and helps protect the company's margins as it works through its heavy debt load.

Source: WSJ

After Norwegian Cruise Lines reported its October results, we updated our fair value. We lowered our rating from Buy to Watch. We added the sale of ships for cash and the growth of passenger spending on board to what we track. We also lowered our projections for occupancy levels and revenue per passenger after accounting for the cancellation of voyages in the Middle East.

Metrics we are tracking