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Why Royal Caribbean, Carnival Corporation, and Norwegian Cruise Line Stocks All Just Popped 5% (and More)

By Rich Smith - Aug 28, 2020 at 12:12PM

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Cruise investors enthused over medical advances against coronavirus.

What happened

For the second day running, cruise stock investors are having a very good day.

Yesterday as you may recall, Big Pharma company Abbott Laboratories (ABT 0.90%) announced the release of a "fast, $5, 15-minute, easy-to-use COVID-19 test" that promises to quickly permit patients to discover if they have antibodies indicating prior infection with the novel coronavirus (such that they can be confident they're now immune, noninfective, and thus "safe" to travel on cruise ships). Today, investors seem to be reacting to news that could prevent them from getting infected in the first place.

Mother and daughter on a cruise ship pointing into the distance

As medical advances emerge, cruise investors think they see a bargain. Image source: Getty Images.

So what

Shares of Royal Caribbean (RCL 1.56%) stock are up 5.7% in 11:20 a.m. EDT trading. Norwegian Cruise Line Holdings (NCLH 2.91%) is up 5.4%, and Carnival Corporation (CCL 1.71%) (CUK 1.56%) has gained 5.3%.

Why are these cruise line stocks going up?

Yesterday, a pair of Wall Street analysts came out with new reports on a pair of vaccine candidates from VBI Vaccines, VBI-2901 and VBI-2902, which initial data (on mice) suggest could be extraordinarily effective in the production of neutralizing antibodies to fight coronavirus. They're apparently so effective that vaccinations with VBI-2901 and VBI-2902 could potentially be administered in a single dose, rather than the more usual two-round vaccination.

In relatively short order, first investment bank Oppenheimer declared they could become "best-in-class" vaccines against COVID-19 (reports TheFly.com), and then Raymond James declared them "the best vaccine of them all."

Now what

Big Pharma is burning both ends of the candle trying to put coronavirus to bed, developing both vaccines to prevent infection with COVID-19 and tests to confirm the presence of protective antibodies. The more progress they make -- or even just promise (VBI's vaccines, after all, haven't even begun Phase 1/2 trials yet) -- the more enthusiasm you can expect to see about cruise line stocks among investors hoping for a recovery in the business.

While I understand the enthusiasm, though, I think a cautionary note is warranted here: It doesn't matter how excited investors get about the prospects for coronavirus vaccines and tests, and it matters even less how excited the PR departments at the companies marketing these products are. Ultimately, the cruise industry still needs the CDC to sign off and lift its no-sail order before there can be any recovery in cruise stocks.

Until then, the recession for cruise investors continues.

Rich Smith 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.
RCL
$42.37 (1.56%) $0.65
Carnival Corporation Stock Quote
Carnival Corporation
CCL
$10.72 (1.71%) $0.18
Carnival Corporation Stock Quote
Carnival Corporation
CUK
$9.75 (1.56%) $0.15
Norwegian Cruise Line Holdings Ltd. Stock Quote
Norwegian Cruise Line Holdings Ltd.
NCLH
$14.16 (2.91%) $0.40
Abbott Laboratories Stock Quote
Abbott Laboratories
ABT
$111.48 (0.90%) $0.99

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

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