(Bloomberg) -- When Viking Holdings Ltd. reports quarterly results on Thursday, the cruise line operator is likely to discover whether its hot start in the stock market can withstand cooling demand in the travel industry.
The company’s shares have rallied 50% since Viking went public in early May, having raised $1.8 billion after increasing the size of its sale several times to feed investor demand. The performance is the best among a handful of US initial public offerings that generated more than $1 billion this year, data compiled by Bloomberg show.
The Bermuda-based company, known for scenic river tours of Europe and luxury ocean sailings, prioritizes travelers’ exploration of each destination over competitors’ reliance on onboard consumption and traditional entertainment. While the cruise industry tries to draw younger crowds, Viking caters to a more-affluent, 55 years-and-up customer base that has no need for casinos and rejects hidden ancillary costs like charges for wi-fi or alcoholic drink packages.
“Viking’s core business effectively focuses its efforts on one demographic: wealthy American baby-boomers, a segment we believe is particularly attractive now and in the coming years, based on projected growth in this segment’s population, wealth, and free time for travel,” Barclays analyst Brandt Montour wrote in a July note.
Investors and analysts are likely to focus on what Viking, the largest luxury river-cruise provider, has to say on forward demand, given its months-long booking window. The company’s shares dropped after its first earnings report as a public company, but have rallied more than 20% since then as peers Carnival Corp., Norwegian Cruise Line Holdings Ltd. and Royal Caribbean Cruises Ltd. boasted record bookings at robust pricing.
All three ocean cruise companies have boosted their outlooks at least twice this year thanks to high passenger volumes. However, their stock prices have been mixed in 2024, with Royal Caribbean up 23% while Carnival is down 17% and Norwegian Cruise has slumped about 21%.
Travel Fatigue
Signs of travel fatigue are mounting, exacerbated by high prices for flights and hotel rooms. Airlines have been forced to slash fares as they face an oversupply of seats. Short-term rental platforms Airbnb Inc. and Expedia Group Inc. warned of softening travel demand, while hotel chains Marriott International Inc. and Hyatt Hotels Corp. each delivered tempered outlooks for the rest of this year.
Yet Wall Street sees the cruise industry as more insulated from macro pressures given its roughly 20% pricing discount to land-based alternatives, such as all-inclusive resort stays and theme park visits.
Analysts specifically point to Viking’s attraction to higher-income consumers and dominant position within the luxury cruise market as notable buffers in the event of an economic downturn.
Some analysts, including Truist’s Charles Patrick Scholes, say Viking faces a high bar on its earnings report because of its peers’ results and its lofty valuation. The bank is one of four firms tracked by Bloomberg with a hold-equivalent rating on the stock, which has eight buys and zero sells.
“The other cruise companies were pretty unanimous in that everything is hunky-dory,” Scholes said. “They set the tone that investors can expect strong results and earnings to be at least modestly ahead of consensus.”
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