Cruise ship operator Viking Holdings Ltd. (NYSE:VIK)’s shares are up by 76% over the past year and by 46% year-to-date. It has long remained one of Cramer’s favorite stocks in the sector. For instance, the CNBC TV host remarked in March that he liked the firm because he thought it was insulated and operated in markets that were difficult to disrupt. In his morning appearance on August 6th, Cramer’s attention shifted to Viking Holdings Ltd. (NYSE:VIK) after he briefly discussed Disney’s results.
“Disney absolutely had a blowout theme park, I mean just great, when you always just, these guys don’t talk about post COVID, you know, like a Royal Carribbean, post COVID. I like Viking, VIK, if you want travel. Oh my god, because they have no kids and gambling!. . .I’d buy some, I mean that’s like an all time high. . .Look I think Viking is family owned, fantastic company and overtime you should buy. I don’t like to buy on spikes.”
Cramer’s preference for Viking Holdings Ltd. (NYSE:VIK) over Royal Caribbean Cruises Ltd. (NYSE:RCL) is supported by several metrics. Starting from average net yields, which measure the profit from each bend, Viking Holdings Ltd. (NYSE:VIK) $596 per day in Q1 is higher than RCL’s $288.95 per day in the second quarter. Additionally, VIK also enjoys more loyalty if we compare disparate figures. In Q1, the firm outlined that 54% of its volume came from repeat guests. On the other hand, Royal Caribbean Cruises Ltd. (NYSE:RCL)’s CEO Jason Liberty remarked during the firm’s first quarter earnings call that the repeat guests represented 40% of the firm’s bookings in a sharp uptick from the previous one-third percentage. However, when it comes to revenue, Royal Caribbean Cruises Ltd. (NYSE:RCL) $4.83 billion in Q1 revenue is much higher than VIK’s $1.05 billion in Q1 sales. Similarly, VIK posted a loss in Q1 while RCL was profitable in Q2.
The difference in their sales also highlights the main debate when it comes to Viking Holdings Ltd. (NYSE:VIK) and Royal Caribbean Cruises Ltd. (NYSE:RCL). For the former, it leaves an overhang over whether the premium valuation, as suggested by a forward P/E ratio of 31, is justified through the focus on the premium traveler market. While Viking Holdings Ltd. (NYSE:VIK)’s higher loyalty and yields appear to have influenced the valuation, the fact that it is significantly higher than RCL’s 17.33 forward P/E does leave little room for error.
On the other hand, Royal Caribbean Cruises Ltd. (NYSE:RCL) has been busy increasing its destination footprint. The firm has invested more than a billion dollars in destinations ranging from the Bahamas to Mexico in order to differentiate its business. Additionally, trackers have also pointed out that Royal Caribbean Cruises Ltd. (NYSE:RCL) enjoys strong post-booking spending, such as that on casinos. Yet, the firm’s scale also leaves it vulnerable to heavy capital expenditure, while the target market is more sensitive to dips in discretionary spending.
As for the hedge funds, 55 out of the 1,022 funds covered by Insider Monkey had held a stake in VIK in Q1. The interest in Royal Caribbean Cruises Ltd. (NYSE:RCL) was similar, with 53 hedge fund stakeholders. However, the concentration is higher in Viking Holdings Ltd. (NYSE:VIK) as the largest stake, belonging to Select Equity Group, was worth $793 million while for RCL, the largest stakeholder was Balyasny Asset Management through its $134 million holding. Yet, 3.4% of RCL’s float is short, which indicates that the funds are equally cautious, while 3.5% of VIK’s float is short as of July end.
While Insider Monkey acknowledges the risk and potential of VIK as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than VIK that has 100x upside potential, check out our report about the cheapest AI stock.
READ NEXT: Jim Cramer Draws the Line on NVIDIA in China: Why National Security Comes First and Jim Cramer Defends His Dell Stance as Investors Complain About Missing Out.
Disclosure: None.
