Please ensure Javascript is enabled for purposes of website accessibility

Why Carnival, Norwegian Cruise Line, and Royal Caribbean Cruises All Jumped Today

By Travis Hoium - Feb 19, 2021 at 2:03PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

By year-end, cruise lines could be fully operational.

What happened 

Shares of cruise line stocks jumped on Friday after some positive comments were made by a big industry insider. Shares of Carnival (CCL 1.97%) (CUK 3.04%) were up as much as 7.7% earlier and are up 6% at 1 p.m. EST. Norwegian Cruise Line (NCLH 1.89%) was up 6.8% and is now trading 5.4% higher. And Royal Caribbean Cruises (RCL 1.09%) traded 6.1% higher and is now up 4.1%. 

This follows a strong week for cruise line stocks on optimism about the effectiveness of COVID-19 vaccines and Carnival closing a $3.5 billion financing round

Cruise ship in port

Image source: Getty Images.

So what

The most notable news today was from Carnival CEO Arnold Donald, who said he thinks "most, if not all" of its fleet will be in operation by the end of 2021. At worst, he thinks early 2022 will see the full fleet active. 

A huge uncertainty for cruise lines has been when they'll be able to return to action. The longer the pandemic keeps people off cruises, the more companies need to keep their businesses afloat and the more uncertainty when any payback will come to shareholders. If Donald is seeing a quick recovery by the end of 2021, that's extremely bullish for the industry. 

It's not clear exactly what a recovery will look like for cruise lines. Vaccines are expected to be widely available in the U.S. by summer, and some companies are considering vaccine passes that would allow for more open movement than current restrictions. That could also be possible on cruise lines, where passenger safety will not only be a priority for operators, it'll be key to getting customers to board ships. 

Now what

There's still a lot of uncertainty for cruise line operators, but it's becoming increasingly clear that brighter days are ahead. By summer, more capacity could be hitting waters, and if Carnival is right, the industry could be full speed ahead by winter. 

What'll be key to watch for investors is just how fast demand comes back. There's chatter that pent-up demand could lead to a Roaring '20s-style recovery for consumer discretionary stocks, which would be great for entertainment and vacation companies like cruise lines. Both utilization and pricing could be high if the pandemic ends soon. 

As much as the market is clearing these comments today, we've had hope for a recovery before, so caution is in order. Demand may be weak if customers don't want to take the risk of going on a cruise ship, and operators may have to price aggressively to attract customers. And with billions in additional pandemic-related debt on their balance sheets, all three companies are more risky than they were a year ago. For now, the market likes that there's some kind of light at the end of the tunnel. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Carnival Corporation Stock Quote
Carnival Corporation
$8.82 (1.97%) $0.17
Royal Caribbean Cruises Ltd. Stock Quote
Royal Caribbean Cruises Ltd.
$35.29 (1.09%) $0.38
Carnival Corporation Stock Quote
Carnival Corporation
$8.14 (3.04%) $0.24
Norwegian Cruise Line Holdings Ltd. Stock Quote
Norwegian Cruise Line Holdings Ltd.
$11.33 (1.89%) $0.21

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.