Unusual Options Activity In Norwegian Cruise Line Holdings

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Norwegian Cruise Line Holdings Ltd., together with its subsidiaries, operates as a cruise company in the United States and internationally. The company operates the Norwegian Cruise Line, Oceania Cruises, and Regent Seven Seas Cruises brands in various locations, Russia, the Mediterranean, Canada, Asia, South America, etc.

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When Carnival and Royal Caribbean were having public relation nightmares several months ago, originally thought Norwegian was going to miss the COVID-19 storm at sea. But eventually the company said the virus was expected to shave 75 cents off 2020 EPS as the COVID-19 outbreak impacted consumer travel sentiment.

Then Norwegian was hit by another COVID-19 storm at sea when the Centers for Disease Control and Prevention extended its initial No Sail Order for an additional 100 days…until late July.

In April, the company said bookings were meaningfully lower than the prior year, with pricing down mid-single digits and Norwegian said it didn’t not have sufficient liquidity to meet its debt obligations over the next 12 months.

Then we had that amazing stronger-than-expected jobs report three weeks ago. Investors are growing more optimistic that the economy could recover more quickly than many economists originally forecasted. And everything thing started going up. I’m talking airlines, Hertz and all the cruise liners including Norwegian. Regarding the travel related stocks, the thought was faster job recovery would mean people would have more for vacation. Roughly half of the passengers that cancelled their trips on the cruise ships opted for future credit instead of a refund.

Last week, NCLH announced the suspension of practically all its voyages between August 1 and September 30. The uptick in current coronavirus cases and stringent safety measures required to ensure passengers’ safety – and their effect on the sailing experience - appear to have resulted in the extension.

If you were booked on a cruise and are disappointed by Norwegian’s actions, don’t blame the cruise operator for the cancellation, says Nomura analyst Harry Curtis. The blame lies squarely with the CDC (the Centers for Disease Control and Prevention).

“We believe the sooner the CDC reconsiders the cruise industry as a willing partner, the faster employees get back to work and dedicated cruise customers can enjoy the same opportunity offered to resort, casino and airline customers,” the analyst concluded.

Nonetheless, the current “unjust delay,” doesn’t alter Curtis’ long-term thesis for NCLH. The analyst reiterated a Buy rating, along with a $23 price target. The implication for investors? Upside potential of 35% from current levels.

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I honestly think there must be some kickbacks for Nomura's analyst Harry Curtis. How could he recommend a buy when Norwegian says it is burning through cash at the rate of $110 million to $150 million each month and has less than one year in cash.

How can the analyst recommend that price target when 12 states hit record highs in daily new COVID-19 cases and hospitalizations from Covid-19 are also rising in 16 states? How can the analyst recommend that price target after Texas and Florida just announced delaying re-opening their economy?

The Smart Money isn't buying the price target. Yesterday, I noticed the Smart Money bought over 14,000 put options at a strike price at $12 that expire on July 2nd.

If price is going to get to $12 in one week, price has to break through the 4 hr demand zone at $14.

This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.

Posted Using LeoFinance



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