What will happen to the airline and cruise ship stocks after the Coronavirus problem ends?

*This is not financial advice. All content should be considered opinionated. We are not responsible for any of your gains and losses. 

Introduction

With the travel and tourism industry taking a huge hit from the coronavirus, many wonder if they'll recover. Talks about a bailout for many of those companies are worrying investors. As investors continue to comprehend the impacts of the lockdowns and this new scenario that's making airlines experience things they haven't experience in years like the need to fly empty, airliners are starting to have deteriorating liquidity. Also, cruise companies are continuing to sail empty, which makes cruise investors even more nervous as many cruise operators have liquidity issues.

Photo by Daniel Eledut on Unsplash

Background

As the stock market started plunging, a big fan of airline stocks, legendary investor Warren Buffett, recently talked about buying the dip on airline stocks. While many would think that it would quell worries for investors regarding airline stocks, it seems like it hasn't as airline stock prices continue to plunge. Looking back at the airline industry from the past and now, many of the airliners that are running today have experienced similar situations before. With the industry having stronger balance sheets than before, there is a good chance that they'll survive this mess. At the same time, with the lockdowns and higher travel restrictions, there could be a chance that they might not survive. 

For the cruise industry, this is a scarier time for them. With very little business and weak balance sheets, many of them are requesting for a bailout from the government. With shares of cruise operators selling off severely, cruise companies could start becoming targets from private equity firms, which is a nice thing to hope for as an investor of a cruise operator. 

Currently, the big question is, how will investors treat airline and cruise stocks after this crisis is over? 

In my opinion, I believe that the cruise and airline industry will garner lower valuations as investors will continue to keep pandemics and biological threats in mind. The coronavirus has scarred the world. With intense sell-offs like this, investors will start demanding a higher margin of safety when investing in these companies, that's why the valuations for companies in these industries will be cheap. 

Now, as a capital gains investor, airline and cruise stocks wouldn't be attractive to you as these industries will start trading with lower valuations for a long time but as a dividend investor, with lower valuations, the usual dividend yield for these airliners will be a lot better than before.

While what I said might've lowered morale, know that there is always a chance that things might be different. Maybe the airline and cruise stocks are going to garner higher valuations as investors take note of their survival through these tough times.

We'll never know what'll really happen but only time will tell.