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Why Carnival, Norwegian Cruise Line, and Royal Caribbean Stocks All Popped Today

By Rich Smith – Updated Oct 7, 2020 at 5:05PM

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J.P. Morgan leaves a conference feeling sunny about cruise stocks.

What happened

It was a slow start today, but as the day wore on, shares of cruise ship operators Carnival (CCL 2.90%), Norwegian Cruise Line Holdings (NCLH 2.26%), and Royal Caribbean Group (RCL 1.77%) all weighed anchor and set sail in afternoon trading. By close of trading Wednesday, shares of Carnival ended 5.3% higher, Norwegian notched a 4.5% gain, and even Royal Caribbean edged up 2.8%.

Cruise ship next to a sunny beach with palm trees

Image source: Getty Images.

So what

Just before noon, J.P. Morgan gave a lift to the entire industry when it declared itself "incrementally bullish" on cruise operators, and raised its price targets across the board: It hiked Carnival stock to $17 a share, raised Norwegian Cruise to $22, and took Royal Caribbean higher to $79.  

The analysts are currently attending the four-day Seatrade Cruise Virtual industry conference (the source of several bullish comments from cruise company CEOs earlier this week), and their big takeaway from the meeting is that cruise industry investors can indeed look forward to a "near-medium-term recovery" in cruise stocks.  

In J.P. Morgan's opinion, the CDC's decision to permit cruising to resume in November, combined with cruise companies' commitment to test all passengers for coronavirus before allowing them to board, sets the stage for cruise stocks to benefit from "significant" pent-up demand, reports TheFly.com. And with demand strong, there shouldn't be a lot of pressure on cruise stocks to lower their ticket prices, propping up profit margins as cruising resumes.

Now what

Despite these positive factors, notes J.P. Morgan, investors still by and large see cruise stocks as awful investments, meaning there's significant room for their stock prices to go up as improvements in the business outlook become clearer.

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 Stock Quote
Royal Caribbean
RCL
$59.13 (1.77%) $1.03
Carnival Stock Quote
Carnival
CCL
$9.59 (2.90%) $0.27
Norwegian Cruise Line Holdings Stock Quote
Norwegian Cruise Line Holdings
NCLH
$16.27 (2.26%) $0.36

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

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