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

By Joe Tenebruso – Updated Jun 11, 2020 at 7:32PM

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With nearly half of U.S. states reporting rising levels of new COVID-19 cases, it's getting tougher to be optimistic about a quick recovery for the cruise industry.

What happened

Cruise ship stocks plummeted on Thursday as health officials in the U.S. and many other countries warned of alarming growth in the number of new COVID-19 cases being diagnosed. By the close of trading, shares of Norwegian Cruise Line Holdings (NCLH -18.04%), Carnival (CCL -23.25%) (CUK -23.01%), and Royal Caribbean (RCL -13.15%) were down 16%, 15%, and 14%, respectively.

So what

In order for the major cruise line companies to begin to recover, two main conditions will need to be met. First, health officials will have to lift the current restrictions on cruise sailings. Second, people will have to start feeling like cruise ship vacations are safe again.

Unfortunately, both of these have become less likely to happen within the timelines that investors desire. If coronavirus infection rates in states across the U.S. continue to rise, the Centers for Disease Control could be compelled to once again extend the no-sail order for cruise ships. With COVID-19 diagnoses also rising in many other countries, officials in Spain, Australia, and Canada, among other nations, have already extended their cruise ship sailing restrictions in the past few weeks.

An iceberg in the shape of a coronavirus cell is blocking the path of a cruise ship.

COVID-19 has become the bane of the cruise ship industry. Image source: Getty Images.

Now what

Many stock traders piled into cruise lines in recent months on the hope that people would flock back to their ships once they were able to set sail again. They have also been betting that Carnival, Royal Caribbean, and Norwegian Cruise Line will be able to weather the coronavirus storm after having refilled their coffers with cash from large debt offerings. However, as COVID-19 cases continue to mount, both of those rosy scenarios are looking less likely. That's leading traders to bail out again, leading to the price declines cruise ship stocks experienced Thursday.

Joe Tenebruso 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.
$37.90 (-13.15%) $-5.74
Carnival Corporation Stock Quote
Carnival Corporation
$7.03 (-23.25%) $-2.13
Carnival Corporation Stock Quote
Carnival Corporation
$6.19 (-23.01%) $-1.85
Norwegian Cruise Line Holdings Ltd. Stock Quote
Norwegian Cruise Line Holdings Ltd.
$11.36 (-18.04%) $-2.50

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

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