Elliott Investment Management Has Overhauled the Board at Norwegian Cruise Line. Will the New Board Members Help Right the Ship?

Norwegian Cruise Line's (NYSE: NCLH) long-term shareholder returns have been poor, particularly in relation to the overall stock market. Over the last five years, through April 23, the stock lost 37.8%. During this time, the S&P 500 index returned 84.3%.

No wonder the company drew the attention of activist investor Elliott Investment Management, which in February revealed that it had built a more than 10% stake in Norwegian. The firm has since moved quickly, getting five of its chosen directors added to the board and pushing four to depart. The activist's chosen representatives are now a majority on the nine-member board of directors.

What does this mean for Norwegian Cruise Line's operations and the potential for its shareholders to reap long-term rewards?

Image source: Getty Images.

The reconstituted board

The cruise company's new board members include a former CEO of British Airways, a former CFO of Disney's experiences division, and two people working at investment firms. This seems like a group that understands consumer-facing businesses and capital allocation.

Based on Elliott Investment Management's nearly 50-year track record, investors can take comfort in its impressive history of creating long-term shareholder value.

The activist investor outlined several broad actions that it wants Norwegian to undertake, such as cutting spending, developing a more effective marketing strategy, and improving the guest experience.

Challenges ahead

All that sounds reasonable, but whether or not those plans will lead to more robust shareholder returns will lie in the details and execution. Investors will have to wait to see how matters unfold.

Norwegian Cruise's revenue increased just by 3.8% to $9.8 billion in 2025 after factoring out foreign-currency translation effects. Its occupancy rate dipped from 104.9% to 103.5%. (That's calculated based on the industry standard of two-person room occupancy.)

On a positive note, its net yield (per available passenger cruise day) increased 2.4% to $301.52. Net yield measures the profitability of its cruises. However, disappointingly, management said in its Q4 report in March that it expects this metric to remain flat this year.

Turning to the stock's valuation, Norwegian Cruise Line has become cheaper since the start of the year. Its price-to-earnings (P/E) ratio has dropped from 24 to 21. However, that's still more expensive than competitors Royal Caribbean Cruises' 17 multiple and Carnival's 12.

Considering its relatively high valuation, investors would need to have confidence that Elliott's selected board of directors can oversee changes that will benefit shareholders to buy in now. However, based on the lack of specificity about what changes are coming at this point, I'd pause before buying shares.

Interested investors may miss some potential upside, but they'll also avoid a lot more potential pain and volatility by waiting until a detailed strategic plan and direction come into focus.

Lawrence Rothman, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walt Disney. The Motley Fool recommends Carnival Corp. The Motley Fool has a disclosure policy.