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Why Norwegian Cruise Line Holdings Stock Dropped 5% This Morning

By Rich Smith – Oct 15, 2020 at 1:16PM

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One analyst remains optimistic about cruise stocks -- but can't say why.

What happened

Shares of cruise line stock Norwegian Cruise Line Holdings (NCLH -1.65%) dropped 5% in early trading Thursday before climbing back to a still disappointing 3.2% loss as of 1 p.m. EDT.

There's no obvious news to explain today's drop. Actually, the most obvious news item in cruise land is of the positive sort: This morning, investment bank Berenberg raised its price target on Norwegian rival Royal Caribbean (RCL -1.16%) to $60 a share.

Paper boat reads NEWS.

Image source: Getty Images.

So what

Even this good news isn't exactly great, however.

For one thing, Royal Caribbean shares were trading close to $60 a share even before Berenberg raised the price target, so the analyst promised little upside. And adding insult to injury, Berenberg failed almost entirely to justify its higher target, instead lamenting that it's tough "assessing the risk and reward for investors" in cruise stocks, and, to be perfectly honest, the bank has "absolutely no idea of the profound impact that the pandemic has had on the capital structures of the cruise companies," reports

Now what

That's hardly the kind of commentary you'd expect to make Royal Caribbean investors confident in their stock. Moreover, because Berenberg couched its comments in words describing "the cruise industry" and "cruise companies" in general, it appears the analyst has little more confidence in Norwegian Cruise's valuation, either -- or Carnival Corporation's (CCL -0.94%), for that matter.

It almost goes without saying: While Norwegian Cruise Line is suffering the biggest drop in share price today, shares of Royal Caribbean and Carnival are both down as well.

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

Stocks Mentioned

Norwegian Cruise Line Stock Quote
Norwegian Cruise Line
$15.46 (-1.65%) $0.26
Carnival Corp. Stock Quote
Carnival Corp.
$8.95 (-0.94%) $0.09
Royal Caribbean Cruises Stock Quote
Royal Caribbean Cruises
$56.43 (-1.16%) $0.66

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

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