All but one of the country's cruise-line stocks took on a little water this week. Shares of Carnival, (CCL 0.88%) (CUK 1.11%) and Norwegian Cruise Line (NCLH -0.52%) declined 3% and 7%, respectively. Royal Caribbean (RCL 0.74%) was the only operator to follow the general market higher, rising 4% for the week.

It was a challenging week for the industry. There were several analyst downgrades, Carnival sold off some ships, Norwegian Cruise Line executed a secondary stock offering, and the U.S. Centers for Disease Control and Prevention (CDC) once again extended the "No Sail Order" that will keep ships from sailing on stateside voyages anytime soon. Let's dive into another busy week for the industry.

A Santa-dressed kayaker paddling presents to a Royal Caribbean ship.

Image source: Royal Caribbean.

Cruising for a bruising  

It was wave after wave of downgrades for the cruise-line operators this week. All three stocks saw their ratings lowered by analysts at Macquarie and SunTrust. All six moves were accompanied with price targets revised lower.

C. Patrick Scholes at SunTrust feels that investors will grow disenchanted with the stocks -- which, at the time, had roughly doubled since their pandemic-sell-off lows -- as resumption dates keep getting extended. He also sees the industry's leading players likely raising debt or equity to stay afloat, and that's not going to come cheap in a distressed travel market.

JPMorgan lowered its price target on Carnival, but an even bigger dagger came from Chris Woronka at Deutsche Bank. He held firm to his neutral rating on the world's largest cruise-line operator but painted a grim picture of how weak earnings will be in the future. He sees Carnival paying roughly $850 million more in interest expense by 2023 than it is right now, and along with a larger share count, it will be harder for Carnival to approach last year's peak profitability. His model shows that the $4.40 a share it reported in net income last year would be whittled down to $2.88 a share with all of the new debt expense and bloated share count that the cruise line has had to take on to stay alive during the lull.

Carnival told investors late last week that it would be disposing of 13 ships and delaying shipyard deliveries of new members to its fleet. This week, it announced that its Holland America line sold four of its ships, resulting in even more cancellations to its growing list of nixed voyages. 

Norwegian Cruise Line was the week's worst performer of the three stocks. It was weighed down later in the week after pricing 16.7 million shares in an underwritten public offering at $15 a share. It also priced $1.15 billion in notes.

You can't fault the cruise lines for raising money now, and the climate isn't as desperate as things were earlier in the sailing suspension. You get a lot more bang for your buck now than you did three months ago, when the stocks were trading for half as much as they are now. However, these financing moves will make it that much harder to return to pre-pandemic per-share profit levels.

Finally, the CDC extending the "No Sail Order" to the end of September isn't a surprise. The players had already pushed out most of their sailings to the fall season.

It wouldn't be a surprise if it happens again, barring a dramatic recovery from the coronavirus crisis, but there was some positive news on that front. Cruise-line stocks briefly moved higher on promising vaccine news. The industry will have a much easier path to recovery if COVID-19 isn't a burning concern. 

For now, volatility will continue to play a starring role for cruise-line stock investors. These aren't safe stocks at the moment, but with all three stocks well off their highs, the recovery doesn't have to be perfect. The first whiffs of a turnaround will get investors and speculators excited again.