Cruise line stocks are tanking as the trading week gets under way. As of noon EST Monday, shares of Norwegian Cruise Line Holdings (NCLH -0.48%) are down 4%, Carnival Corporation (CCL 1.00%) (CUK 1.55%) is down 5.9%, and Royal Caribbean (RCL 0.82%) is down an even 6%.
But it's Carnival pulling the whole sector lower.
This morning, the world's biggest publicly traded cruise line announced a new slew of "ship-specific cruise cancellations and movements." Among the new developments, three cruise ships -- Carnival Magic, Carnival Paradise, and Carnival Valor -- are going to be laid up in dry dock until November 2021, and cruises aboard these ships that were slated to begin as early as June will now be canceled.
And that's the good news.
Carnival may be the catalyst for today's sell-off, but it's not the only cruise line encountering difficulties. As Barron's noted on Friday, cruises aboard all three major cruise lines are now not expected to resume before the fourth quarter of 2021, or even early 2022.
Carnival's announcement this morning appears to support that bearish prognosis.
Throwing cold water on bullish investors who've cited increases in bookings for 2021 cruises as a reason for optimism, Barron's quoted analysts at Truist Securities warning that "we now see July as the best case for restart" (emphasis added). This suggests that cruise lines, which have now uniformly canceled all cruises out of U.S. ports through the end of April, could very well be forced to postpone cruising repeatedly even as spring and summer approach.
What does this mean for investors? Choppy waters, to borrow a phrase. If Truist and Barron's are right, then we seem to be looking at a scenario in which cruise stocks may repeatedly be bid up in anticipation of an approaching end to cruise suspensions, and/or updates on bookings numbers, only to have the rug pulled out from under investors as those cruise suspensions stretch farther and farther back into the calendar year.
Adding to investors' dismay, as cruise lines come to the realization that they won't resume cruising as soon as they had hoped, they may need to issue more stock to raise more cash -- diluting shareholders in the process.
By the time cruising does resume, and Carnival, Norwegian, and Royal Caribbean turn profitable again, those profits may turn out to be a whole lot thinner than investors today expect.