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Why Carnival, Royal Caribbean, and Norwegian Cruise Line Stocks Sank on Wednesday

By Joe Tenebruso - Updated May 14, 2020 at 8:25AM

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Worrisome comments by an important health official frightened investors.

What happened

Cruise ship stocks declined on Wednesday ahead of Norwegian Cruise Line Holdings' (NCLH -9.55%) upcoming earnings report on Thursday morning. Shares of Carnival (CCL -6.82%), Royal Caribbean (RCL -7.19%), and Norwegian fell 7%, 5%, and 7%, respectively.

So what

Following comments by health officials, investors appear to be growing more concerned that a vaccine for COVID-19 could take longer than hoped. 

On Tuesday, Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, told a Senate committee that a vaccine or widely available treatment for the disease caused by the coronavirus would most likely not be ready by the fall. Fauci did express hope that a vaccine could be found in the next year or two, though he cautioned, "There's no guarantee that the vaccine is actually going to be effective." 

Fauci also warned Congress that reopening the economy too soon could have dire consequences. "There is a real risk that you will trigger an outbreak that you may not be able to control, which in fact, paradoxically, will set you back, not only leading to some suffering and death that could be avoided, but could even set you back on the road to try to get economic recovery," he said. 

A cruise ship sailing under a dark sky.

The cruise ship industry may face dark skies for far longer than many investors expected. Image source: Getty Images.

Now what

These comments likely had investors reevaluating their outlook for cruise ship companies, which are particularly exposed to COVID-19 outbreaks. Fears are growing that health officials could decide to extend the sailing restrictions placed on cruise ship operators during the pandemic. With their ships stuck in port, Royal Caribbean, Norwegian, and Carnival are all bleeding cash, and any further delays in resuming their operations could have a disastrous impact on their already beleaguered balance sheets. 

Investors can expect to receive an update on Norwegian's current outlook for the cruise ship industry when it reports earnings on Thursday.

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Stocks Mentioned

Royal Caribbean Cruises Ltd. Stock Quote
Royal Caribbean Cruises Ltd.
RCL
$33.69 (-7.19%) $-2.61
Carnival Corporation Stock Quote
Carnival Corporation
CCL
$8.74 (-6.82%) $0.64
Norwegian Cruise Line Holdings Ltd. Stock Quote
Norwegian Cruise Line Holdings Ltd.
NCLH
$11.27 (-9.55%) $-1.19

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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