Please ensure Javascript is enabled for purposes of website accessibility

Did Carnival, Royal Caribbean, and Norwegian Cruise Line Earn Last Week's Gains?

By Rick Munarriz – Jun 7, 2020 at 4:30PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The three cruise line stocks soared at least 34% higher this past week.

Some of the past week's biggest winners were cruise line stocks. Shares of Carnival (CCL 0.36%) (CUK 0.08%)Norwegian Cruise Line Holdings (NCLH 4.58%), and Royal Caribbean (RCL 2.67%) moved sharply higher.

The cruise line companies saw their stocks soar even though an analyst put out bearish updates for all three players. There's also nothing to suggest that Carnival, Norwegian Cruise Line, and Royal Caribbean will be setting sail anytime soon. Carnival's Princess line announced an extension to its suspended sailings. However, that didn't stop all three stocks from appreciating by more than a third last week. 

A tsunami wave consisting of dollar bills and coins.

Image source: Getty Images.

When the ships are down

Last week was pretty spectacular for investors in the three publicly traded cruise line operators. The three stocks rose between 34% and 43% over the past five trading days.

  • Carnival: up 37%.
  • Royal Caribbean: up 34%.
  • Norwegian Cruise Line: up 43%.

Better-than-expected unemployment news may have sent travel stocks higher, but there is no indication that the cruise lines will be sailing again by the early August resumption dates they're currently booking. Many ships still have crew members who need to be repatriated -- 60,000, at last count -- and if you think Carnival, Royal Caribbean, and Norwegian Cruise Line will have an easy time staffing their ships later this year, you probably aren't paying attention. 

With thousands of confirmed COVID-19 cases earlier this year on cruise ships and at least 82 related fatalities, cruise lines will be put to the test. Crew and passengers alike will need to be convinced that hitting the high seas for a few days with thousands of other people is a good idea in the near future. 

A Financial Times headline over the weekend asked, "Coronavirus: is this the end of the line for cruise ships?" That's not the first time mainstream media has questioned the long-term viability of the industry. And it won't be the last.

For now, the industry is doing a reasonable job of getting more than half of its passengers on cancelled sailings to opt for future cruise credit instead of an outright refund, but that can change in the coming months. If the first wave of summer itineraries gets pushed out again and folks don't take kindly to the experience-snipping restrictions that cruise lines will have to put into action to be cleared for sailing, it could eat into the near-term enthusiasm. 

Morgan Stanley analyst Jamie Rollo downgraded Norwegian Cruise Line and reinstated coverage of Carnival and Royal Caribbean last week. Rollo now has underweight ratings on all three stocks now. But it didn't stop any of the three stocks from rallying later in the week. With the economy opening up across the country, it doesn't seem to register that the now-rising pace of new COVID-19 cases may derail the cruise industry's restart. 

Investors who approached the three slammed investments as value stocks in mid-March have done well. The real test comes now that they're market darlings selling experiences that they don't know if they'll be able to deliver in two months. The initial sell-off was overdone, but the recovery seems to be outpacing the fundamentals at this point. 

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

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Royal Caribbean Cruises Ltd. Stock Quote
Royal Caribbean Cruises Ltd.
RCL
$38.91 (2.67%) $1.01
Carnival Corporation Stock Quote
Carnival Corporation
CCL
$7.05 (0.36%) $0.03
Carnival Corporation Stock Quote
Carnival Corporation
CUK
$6.20 (0.08%) $0.01
Norwegian Cruise Line Holdings Ltd. Stock Quote
Norwegian Cruise Line Holdings Ltd.
NCLH
$11.88 (4.58%) $0.52

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
326%
 
S&P 500 Returns
102%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.