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

By Rich Smith - Dec 3, 2020 at 12:41PM

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Bank of America likes cruise line stocks -- but only a little.

What happened

Cruise line stocks surged out of port Thursday, with shares of Royal Caribbean ( RCL -3.08% ) rising 5.3% in 11:50 a.m. EST trading, Norwegian Cruise Line Holding ( NCLH -4.54% ) up 8.9%, and industry leader Carnival Corporation ( CCL -3.86% ) ( CUK -3.87% ) leading the pack -- up 10.3%.

And yet, while all the stock price moves are positive, it would not be accurate to say that all the news is positive today.

Three cruise liners lined up abreast in port.

Image source: Getty Images.

So what

At first glance, it appears that Wall Street is the big catalyst behind today's move.

This morning, Bank of America raised its price targets on the two smaller players in the cruise industry -- Norwegian Cruise and Royal Caribbean. The former received a hike to $25, reports StreetInsider.com today, and the latter a hike to $60. But here's the thing: Despite raising its price target on Norwegian nearly 40% and doubling its price target on Royal Caribbean, Bank of America still only rates Norwegian neutral, and Royal Caribbean remains tagged with an underperform rating (i.e., sell).

Now what

Meanwhile, most other news for the big cruise line stocks is of the negative sort. Yesterday, Royal Caribbean announced it is extending its suspension of cruises at several of its cruise brands, including Royal Caribbean International (through at least Jan. 20, 2021), Celebrity (Feb. 28), and Silversea (April 1 for most vessels). Royal Caribbean did, however, confirm that its Quantum of the Seas vessel has resumed service in Singapore, reports CruiseIndustryNews.com -- at 27% occupancy.    

Simultaneously, Norwegian Cruise said it is canceling all voyages previously scheduled to depart in January and February 2021, and most trips in March as well.  

This morning, the third shoe dropped when Carnival Cruise announced it is canceling its February itineraries and delaying the first sailing of its Mardi Gras cruise ship into late April.  

Long story short, even though the CDC's no-sail order is technically history, the cruise industry is still months away from normal -- and this recession isn't over yet.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Royal Caribbean Cruises Ltd. Stock Quote
Royal Caribbean Cruises Ltd.
RCL
$66.76 (-3.08%) $-2.12
Carnival Corporation Stock Quote
Carnival Corporation
CCL
$17.20 (-3.86%) $0.69
Carnival Corporation Stock Quote
Carnival Corporation
CUK
$15.91 (-3.87%) $0.64
Norwegian Cruise Line Holdings Ltd. Stock Quote
Norwegian Cruise Line Holdings Ltd.
NCLH
$18.29 (-4.54%) $0.87

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

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