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Why Carnival, Royal Caribbean, and Norwegian Cruise Line Stocks Rose Today

By Joe Tenebruso – Updated Jun 1, 2020 at 5:33PM

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Cruise ship investors cheered hopeful coronavirus news.

What happened

Cruise ship stocks rallied on Monday, as optimism for COVID-19 vaccines and treatments rose. By the close of trading, shares of Carnival (CCL 0.27%), Royal Caribbean (RCL 2.45%), and Norwegian Cruise Line Holdings (NCLH 2.86%) were up 6.7%, 7.3%, and 10.4%, respectively. 

So what

A flurry of encouraging coronavirus-related developments in recent days likely contributed to the gains in cruise ship stock prices.

On Friday, Moderna (MRNA 3.01%) announced the commencement of its phase 2 study for its COVID-19 vaccine, mRNA-1273. Moderna's experimental drug produced promising preliminary phase 1 results, released on May 18, and the biotech company has been ramping up its manufacturing capabilities so as to be capable of producing large scale quantities of the vaccine should it prove safe and effective. 

On Monday, Eli Lilly (LLY -0.14%) began testing an experimental antibody treatment specifically designed to attack SARS-CoV-2, the virus that causes COVID-19. Lilly is developing the medicine, called LY-CoV555, in partnership with privately held AbCellera Biologics. AbCellera and the National Institute of Allergy and Infectious Diseases (NIAID) identified the antibody from a blood sample taken from one of the first people who recovered from COVID-19 in the U.S. 

Also on Monday, Gilead Sciences (GILD 0.12%) released results from a phase 3 clinical trial of its COVID-19 treatment, remdesivir. Gilead said the study showed patients who received a five-day treatment of remdesivir plus the standard of care were 65% "more likely to have clinical improvement at Day 11 compared with those in the standard of care group." These results are encouraging since they suggest Gilead's remdesivir could potentially help people with moderate cases of COVID-19 recover faster. 

A cruise ship sailing with the sun behind it.

Cruise ship stocks rallied on progress toward coronavirus treatments. Image source: Getty Images.

Better still, we received good news out of Russia on Monday. The country's sovereign wealth fund has financed the development of a COVID-19 treatment based on an influenza drug named favipiravir. Preliminary studies reportedly showed that the treatment, called Aviifavir, could shorten recovery times from COVID-19. Russia has reportedly approved the drug to treat COVID-19 and will start shipping it to treatment centers this month, according to CNBC. 

Now what

Carnival, Royal Caribbean, and Norwegian have seen their businesses (and, by extension, their stock prices) devastated by COVID-19. As multiple outbreaks aboard cruise ships resulted in more than 3,000 people getting sick and 82 deaths, according to the Miami Herald, the Centers for Disease Control issued no-sail orders in March and extended them in April. With their ships stuck at port, Carnival, Royal Caribbean, and Norwegian are bleeding cash.

All three of the major cruise operators have raised large amounts of capital by taking on additional debt to be able to pay their expenses until coronavirus-related sailing restrictions are lifted. Yet even after these sailing restrictions are removed, many people might decide to avoid a cruise until an effective vaccine or treatment for COVID-19 is discovered.

Thus, the stocks of Carnival, Royal Caribbean, and Norwegian Cruise Line are likely to continue reacting favorably to more positive developments in the race for a coronavirus cure and vaccine.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Gilead Sciences. 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.
$38.83 (2.45%) $0.93
Carnival Corporation Stock Quote
Carnival Corporation
$7.05 (0.27%) $0.02
Norwegian Cruise Line Holdings Ltd. Stock Quote
Norwegian Cruise Line Holdings Ltd.
$11.69 (2.86%) $0.33
Gilead Sciences, Inc. Stock Quote
Gilead Sciences, Inc.
$61.76 (0.12%) $0.07
Eli Lilly and Company Stock Quote
Eli Lilly and Company
$322.89 (-0.14%) $0.46
Moderna, Inc. Stock Quote
Moderna, Inc.
$121.81 (3.01%) $3.56

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

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