We recently compiled a list of the 10 Worst Cruise Stocks to Buy Now According to Short Sellers. In this article, we are going to take a look at where Lindblad Expeditions Holdings, Inc. (NASDAQ:LIND) stands against the other cruise stocks.
The cruise industry accelerated after taking a significant hit during the COVID-19 pandemic. As per the Cruise Lines International Association (CLIA), ~35.7 million passengers are anticipated to set sail in 2024. This translates to 6% growth as compared to 2019. JP Morgan Research highlighted that major cruise lines enjoyed a successful 2024 wave season between January and March when operators provided the best deals. CLIA highlighted that, in 2023, the passenger volume touched a record 31.7 million, exhibiting a rise of 7% over 2019 levels.
Wall Street experts believe that travel exchange-traded funds (ETFs) are well-placed to soar on the back of a resurgence in consumer demand for travel-related activities, supported by post-pandemic recovery and changing consumer behaviors. Amidst some short-term challenges, the long-term outlook for the travel sector is positive as a result of demographic shifts and an increased preference for experiential spending.
Positive Demographic Shifts Should Be a Primary Growth Enabler
Earlier, Baby Boomers used to make up the core consumer base for the broader cruise industry. Today, however, an increased number of younger travelers continue to come on board. As per CLIA, ~73% of Millennials and Gen X travelers mentioned that they would consider a cruise vacation. Also, a renowned cruise company has recently mentioned that half of its cruise customers are Millennials or younger. This is because of rising affluence. Moreover, according to the bank’s research, the spending capacity of Millennial customers has seen an increase of ~49% since 2019. Today, the average net worth of an individual aged 40 or under sits at ~$259K.
The cruises continue to attract more first-time passengers. The cruise companies are seeing “new-to-cruise” in their 2025 bookings, with this customer category rising by more than 30% versus a year ago.
The bank believes that cruise operators are improving and modernizing their offerings to make them appealing and highlighted that key operators continue to invest in new hardware, notably mega-ships and private destinations. This has been driving more eyeballs to the broader cruise and tourism industry, accelerating new-to-cruise acquisition. CLIA recently highlighted that the cruise industry has been deploying billions in new ships and engines which give flexibility to use low to zero-GHG fuels with little to no engine modification.
Cruises Over Land-based Activities
According to a survey by the bank’s research division held in April, only ~29% of respondents have excess savings. Notably, ~45% of the respondents are expected to spend less in discretionary categories over the upcoming 12 months. This implies an increased cautious behavior even in the environment of moderating inflation.
This scenario is placing cruise voyages, that are cheaper than land-based vacations, in a strong position. Consumers are focused on value within discretionary categories. The value spread between cruises and land-based alternatives stood at 25%-30% today as compared to 10%-15% pre-pandemic. Despite higher inflation, cruise lines continue to focus on improved experiences, without compromising quality or service. This should further enhance their value.
Despite a tough consumer spending environment, both ticket and onboard prices increased over the past few months. This means that the demand backdrop is strong for the overall cruise industry. The bank’s research shows that more than 85% of tickets have been booked for 2024, with a focus now turning to 2025 and bookings already exceeding historical levels. Moreover, the industry should grow revenues by high-single digits over the upcoming 5 years, tapping ~3.8% of the global vacation market by 2028.
Our methodology
To list the 10 Worst Cruise Stocks to Buy Now According to Short Sellers, we used a Finviz screener to filter out stocks catering to the cruise business. Next, we narrowed our list of stocks by selecting the ones having high short interest. Finally, the stocks were ranked in ascending order of their short interest.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Lindblad Expeditions Holdings, Inc. (NASDAQ:LIND)
Short % of Float (As of 15 August): 6.98%
Number of Hedge Fund Holders: 16
Lindblad Expeditions Holdings, Inc. (NASDAQ:LIND) offers expedition cruising and adventure travel services.
As of 15th August 2024, the company’s short % of float stood at ~6.98% as short sellers believe that geopolitical headwinds have negatively impacted travel itineraries. The company’s margins remain pressured despite elevated activity. This was mainly because of lower occupancy as compared to the pre-Covid levels. Also, cost inflation led to higher expenses which have impacted its margins. On a TTM basis, its operating margin was -6.01%.
In its 2Q 2024 results, Lindblad Expeditions Holdings, Inc. (NASDAQ:LIND) highlighted that higher general and administrative costs limited the gains in Lindblad segment’s Adjusted EBITDA. These costs were led by higher personnel costs and increased royalties associated with the expanded National Geographic agreement. Considering the geopolitical issues, there can be pressures on its occupancy levels. Also, increased debt might weigh on the company’s future. As of 2Q 2024 end, its Long-term debt (less current portion) stood at $623.5 million, an increase from $621.7 million (as on December 31, 2023).
However, Wall Street experts believe that the recently announced transactions are expected to drive future growth. The company announced the acquisition of Wineland-Thompson Adventures, which expands Lindblad Expeditions Holdings, Inc. (NASDAQ:LIND)’s land experience segment with Tanzania safari specialist Thomson Safaris, and Gibb’s Farm lodge in East Africa. Market experts believe that the main competitive advantage is its ability to provide premium experiences, as the company specializes in smaller and more expensive adventure cruises. As a result, Lindblad Expeditions Holdings, Inc. (NASDAQ:LIND) has built a strong loyalty base of wealthy customers.
The company expanded its partnership with National Geographic in November 2023. It is now the only partner for National Geographic cruises until 2040. It will be with The Walt Disney Company, which is an affiliate of National Geographic, providing expansion opportunities.
B. Riley upped their price target on the shares of Lindblad Expeditions Holdings, Inc. (NASDAQ:LIND) from $15.00 to $16.00, giving a “Buy” rating on 23rd August. As per Insider Monkey’s 2Q 2024, 16 hedge funds were long Lindblad Expeditions Holdings, Inc. (NASDAQ:LIND), up from 15 in the preceding quarter.
Ariel Investments, an investment management company, released first-quarter 2024 investor letter. Here is what the fund said:
“In contrast, shares of luxury adventure travel services company, Lindblad Expeditions Holdings, Inc. (NASDAQ:LIND) traded sharply lower in the quarter on an earnings miss and cautious full year 2024 outlook, as geopolitical headwinds negatively impact travel itineraries. Importantly, LIND continues to deliver positive performance within its land-based segment, while management remains disciplined in not sacrificing long-term pricing for sea-based voyages to stimulate near-term demand. Looking ahead, we believe LIND’s stable land-based segment will continue to anchor the company’s profitability. We also expect the enhancement of its strategic relationship with Disney/National Geographic to provide a meaningful tailwind for multiple expansion as the company extends its market share in the expedition tourism niche.”
Overall LIND ranks 7th on our list of the worst communication stocks to buy according to short sellers. While we acknowledge the potential of LIND as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than Z but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.