Norwegian Cruise Line Holdings stock jumped more than 30% today, just one day after its IPO.
Norwegian Cruise Line Holdings Ltd. (NASDAQ:NCLH) stock was trading high today, just one day after the firm went on the public market. The company went public yesterday on the Nasdaq exchange at $19 per share, but its stock has soared today, reaching above $25 per share at the time of writing.
The company, which offers worldwide cruises on its 11 ships, stated that the purpose of the IPO was to reduce the company’s debt burden. The firm priced its IPO at the upper end of the range, but that was clearly too low as investors poured money into the stock this morning.
The reasons for the popularity of the stock, which is trading at a P/E multiple of around 12, are primarily down to the increasing popularity of cruises. The IPO valued the company at around $3.8 billion. Today’s boost in prices has seen the company and its market cap reach over 45 billion.
Carnival Corporation (NYSE:CCL) is the biggest player in the cruise space with a market cap of more than $30 billion. the firm’s shares have risen by more than 25% in the last twelve months as interest in the cruise industry have risen. Carnival controls about 50 percent of the cruise market.
Another rival, closer in size to Norwegian Cruise Line Holdings Ltd. (NASDAQ:NCLH), is Royal Caribbean Cruises Ltd. (NYSE:RCL) valued at just over $8 billion. Investors have seen this firm’s stock rise by more than 30% in the last twelve months, another clear indicator of the strength of cruise line stocks.
The banks that led the Norwegian Cruise Line Holdings Ltd. (NASDAQ:NCLH) IPO, UBS AG (NYSE:UBS) and Barclays PLC (LON:BARC) (NYSE:BCS), clearly underestimated the popularity of stocks and undervalued the company going into the IPO. Today’s stellar rise to a price of over $25 per share is clear evidence of that.
Another indicator of the opportunities to be had in the cruise industry is the involvement of hedge funds in the space. After yesterday’s IPO Apollo Global Management LLC owns about 33% of the firm. Last year that hedge fund, partnering with TPG Capital, bought half of Norwegian Cruise Line Holdings Ltd. (NASDAQ:NCLH).
TPG Capital now owns about 11% of the company’s stock. By market capitalization, the 33% of the firm now owned by Apollo Capital management is now worth just less than 3 billion, not a bad turn around. If Norwegian Cruise Line Holdings Ltd. (NASDAQ:NCLH) continues to grow, and it is clear that investors expect it to, that chunk could be worth much more in twelve months time.
It may be too late to get in on the spectacular returns offered by the cruise market in the last twelve months, but those investing in Norwegian Cruise Line Holdings Ltd. (NASDAQ:NCLH), clearly believe the stock has some value to return to investors.
The tourism trade can, however, be fickle, particularly where cruises are concerned. Unlike hotels, cruises tend to go in and out of fashion, the rise in popularity right now is likely to result in a later reaction that will see sales fall off. The question is when this is likely to occur, from today’s trades it would seem investors don’t expect that any time soon.