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Why Carnival, Royal Caribbean, and Norwegian Cruise Line Stocks Sank Thursday

By Joe Tenebruso - Updated May 29, 2020 at 8:39AM

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The coast isn't yet all clear for cruise-ship investors.

What happened

Cruise-ship stocks gave up some of their recent gains on Thursday. Shares of Carnival (CCL 6.35%), Royal Caribbean (RCL 2.86%), and Norwegian Cruise Line Holdings (NCLH 9.97%) fell 7.6%, 4.8%, and 8.6%, respectively.

So what

Many travel-related companies saw their stock prices rally as the markets resumed trading after Memorial Day weekend. Crowds of people were seen at outdoor events around the country, despite coronavirus-related social distancing guidelines still being in effect in most areas. Many people are apparently willing to risk their lives in order to partake in these activities.

The news likely gave investors optimism that people would also return to cruise ships once they begin sailing again, and shares of Carnival, Royal Caribbean, and Norwegian Cruise Line Holdings rose in kind.

Rough water off the side of a cruise ship.

Cruise-ship stocks still face rough waters ahead. Image source: Getty Images.

In recent days, however, multiple events have shown that the coast is not yet clear for the major cruise-ship operators. Reports that several trial volunteers experienced adverse reactions to Moderna's experimental COVID-19 vaccine reminded investors that it's still uncertain if the leading novel coronavirus vaccine candidates will prove to be both safe and effective. Additionally, Merck's CEO Ken Frazier cautioned that the time frames given by other vaccine developers may be too optimistic -- and that it could take much longer than 18 months before a COVID-19 vaccine becomes widely available. 

While some people might be willing to risk their lives to go on a cruise during the coronavirus pandemic, many won't. Thus, this recent news may have tempered investors' optimism for a faster-than-expected vaccine rollout and, by extension, cruise-ship stocks.

Now what 

To their credit, Carnival, Royal Caribbean, and Norwegian Cruise Line have all raised vast sums of money to stay afloat until coronavirus-related sailing restrictions end. However, even if no sail orders are lifted, people won't necessarily just flock back to cruise ships. Many people will likely hold off until we have an effective treatment or vaccine for COVID-19.

Cruise-ship stocks will likely continue to react to new vaccine-related developments in the days and weeks ahead.

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Stocks Mentioned

Royal Caribbean Cruises Ltd. Stock Quote
Royal Caribbean Cruises Ltd.
RCL
$36.30 (2.86%) $1.01
Carnival Corporation Stock Quote
Carnival Corporation
CCL
$9.38 (6.35%) $0.56
Norwegian Cruise Line Holdings Ltd. Stock Quote
Norwegian Cruise Line Holdings Ltd.
NCLH
$12.46 (9.97%) $1.13

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

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