Cruise ship stocks sank on Monday, as alarmingly high COVID-19 case counts threaten to postpone the beleaguered industry's recovery. By the close of trading, shares of Carnival ( CCL 9.22% ) ( CUK 8.81% ), Royal Caribbean ( RCL 7.17% ), and Norwegian Cruise Line Holdings ( NCLH 7.70% ) were down 7.4%, 3.3%, and 3.4%, respectively.
Even states that have previously been able to rein in the spread of COVID-19 have suffered a resurgence of the disease. Governors in New York and California have warned that their states' hospitals could soon be overwhelmed. To avoid this nightmare scenario, they are enacting emergency measures, including the possibility of new stay-at-home orders.
At the same time, the Centers for Disease Control and Prevention (CDC) recently raised its risk rating on cruise ship travel to its highest level for contracting COVID-19. "CDC recommends that all people avoid travel on cruise ships, including river cruises, worldwide, because the risk of COVID-19 on cruise ships is very high," the agency states on its website.
These events are likely to deter many would-be travelers from booking cruises, even after the major cruise lines resume operations in the U.S. and abroad in the coming months.
The longer-term outlook for the cruise industry is potentially much brighter. Biotech giant Moderna said on Monday that an analysis of its experimental coronavirus vaccine showed it to be 94.1% effective at preventing COVID-19. This and other vaccine candidates, such as that of Pfizer, could help to bring the pandemic to an end. But this will take time.
An investment in Carnival, Royal Caribbean, or Norwegian Cruise Line Holdings is thus a bet that they can survive long enough for the COVID-19 crisis to subside, leading passengers to book cruise vacations en masse once again. It's a risky wager, but one that could become increasingly likely to pay off as Moderna's and Pfizer's coronavirus vaccine development efforts progress.