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Stock Market News: Why Shares of Cruise Companies Are Soaring as Moderna Plunges

By Dan Caplinger – Updated May 26, 2020 at 2:05PM

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Good news is lifting much of the market, but some stocks are getting left out.

Tuesday morning brought renewed enthusiasm to Wall Street, as investors grow increasingly optimistic that economic reopenings taking place across the U.S. will have a positive result without causing a new uptick in COVID-19 cases. Market participants focused on the possibility that a coronavirus vaccine could be out sooner than expected. Just before 11 a.m. EDT, the Dow Jones Industrial Average (^DJI -0.51%) was up 627 points to 25,029. The S&P 500 (^GSPC -0.17%) rose 58 points to 3,014, and the Nasdaq Composite (^IXIC 0.24%) gained 122 points to 9,447.

Cruise ship stocks have taken a big hit from the pandemic, but today's big rise in shares of Royal Caribbean Cruises (RCL -11.54%), Carnival (CCL -20.20%), and Norwegian Cruise Line Holdings (NCLH -14.74%) shows just how excited investors are about the prospect of the companies being able to sail again. Yet Moderna (MRNA 2.44%) found itself left out of the rally, as shareholders realized that just because a coronavirus vaccine might be inevitable, it doesn't mean that every single drugmaker looking for a solution will end up profiting from their efforts.

These stocks are cruising

Cruise ship operators showed solid gains Tuesday morning, with Royal Caribbean up 11% and Carnival and Norwegian weighing anchor with 13% gains. As the industry continues to race against time, the prospect of being able to return to sea sooner rather than later could end up being a saving grace for these three cruise stocks.

White cruise ship with blue and orange deck in an inlet near a beach and islands.

Image source: Getty Images.

The big debate over cruise companies on Wall Street is whether they can make it financially until they're able to start sailing again. Currently, a no-sail order is keeping ships in port, and the cruise operators have canceled voyages into the summer months. That means the cruise companies are burning cash to pay for fixed expenses even without operating, which explains the dramatic efforts that some of them have made to improve their liquidity situations. Bulls don't dispute that 2020 will be ugly from a profitability standpoint, but they believe cruise companies have the financial reserves to make it through until travel opens up.

Yet it's also important to remember that even amid dramatic volatility, Norwegian, Royal Caribbean, and Carnival are still nowhere near where they traded before the coronavirus pandemic hit. Double-digit percentage moves in both directions might make it seem like the stock price should be making progress toward a recovery, but the size of the stocks' declines makes it all the more difficult to mount a rebound that lasts. Moreover, given stock offerings at low prices, it's entirely possible that cruise ship stocks will take years to recover to their former levels even if the companies are able to sail promptly later this summer.

Will Moderna be the big winner?

Meanwhile, shares of Moderna fell 11% Tuesday morning. As shareholders are finding out, most people don't care which company develops a coronavirus vaccine -- they just want some vaccine to prevent COVID-19.

It recently looked like Moderna might prove victorious in its effort to be first out of the gate with a coronavirus solution. Early last week, release of clinical trial data sent Moderna stock up 20% in just one day. Even though shares gave back much of those gains as investors realized that the phase 1 trial update provided information on just eight of the study's 45 participants, Moderna still expects to move forward aggressively to build larger trials and seek a viable candidate.

Yet recent news from rivals Novavax (NVAX 1.72%) and Merck (MRK) reminded Moderna shareholders that there are many companies vying for supremacy on the vaccine front. Merck said it's working on two possible vaccine candidates, as well as drugs that could help treat COVID-19. Yesterday, Novavax announced it has started human trials of its vaccine, with 130 study participants expected to produce data starting in July.

Moderna still has a chance to emerge as the first-mover on the vaccine front, but the field is getting more crowded all the time. Today's big drop in Moderna stock reflects the changing dynamics in the race for a solution to the COVID-19 pandemic, and investors can expect continued volatility as long as the coronavirus persists.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool recommends Carnival. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Royal Caribbean Cruises Ltd. Stock Quote
Royal Caribbean Cruises Ltd.
$38.60 (-11.54%) $-5.04
Carnival Corporation Stock Quote
Carnival Corporation
$7.31 (-20.20%) $-1.85
Novavax, Inc. Stock Quote
Novavax, Inc.
$18.89 (1.72%) $0.32
Norwegian Cruise Line Holdings Ltd. Stock Quote
Norwegian Cruise Line Holdings Ltd.
$11.82 (-14.74%) $-2.04
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$29,077.49 (-0.51%) $-70.85
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$3,634.25 (-0.17%) $-6.22
Merck & Co., Inc. Stock Quote
Merck & Co., Inc.
$86.64 (%)
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
$10,763.15 (0.24%) $47.68
Moderna, Inc. Stock Quote
Moderna, Inc.
$120.95 (2.44%) $2.88

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

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