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Why Carnival Stock Slipped This Morning

By Rich Smith - May 19, 2021 at 11:17AM

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How will cruise lines deal with unvaccinated kids?

What happened

Shares of Carnival (CCL -5.55%) (CUK -6.00%) slipped nearly 5% in early trading Wednesday, but don't panic. I suspect today's share price weakness has more to do with the broad sell-off in the S&P 500 than with cruise stocks in particular.

At 10:30 a.m. EDT today, the S&P 500 was off 1.3%, and Carnival stock -- which has proved to be more volatile than the broader market this past year -- was down 2.3%.

Young girl looks  over the railing on a cruise ship.

Image source: Getty Images.

So what

China announced yesterday that it is forbidding its financial institutions from conducting transactions in cryptocurrencies, sparking a sell-off in that market that quickly spilled over into the broader stock market. At the same time, Carnival investors in particular are having to juggle stock-specific news this week:  

On the one hand, on Monday the company announced it will resume cruising in the Caribbean and Europe this summer, and hopes to resume cruising out of U.S. ports as well (CDC permitting). On the other hand, the company has said that it does not intend to follow Norwegian Cruise Line's (NCLH -4.56%) lead in requiring that all passengers be vaccinated against COVID-19.

Now what

Interviewed on NBC Monday night, Carnival president Christine Duffy pointed out that "we wouldn't be able to have kids under 12 on board" if it established such a requirement -- a valid concern for a family friendly cruise line. Faced with the same dilemma, Royal Caribbean (RCL -5.17%) has taken a middle road, announcing that it will only require vaccinations for passengers 18 and older.    

As the economy reopens, ultimately every business -- not just cruise lines -- will have to address how to deal with a mix of vaccinated and unvaccinated customers, including those not old enough for a vaccine. It's a question of how much revenue you want to potentially take in, versus how much business you might drive away if certain customers don't want to risk being in contact with others.

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

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Stocks Mentioned

Carnival Corporation Stock Quote
Carnival Corporation
CCL
$9.87 (-5.55%) $0.58
Royal Caribbean Cruises Ltd. Stock Quote
Royal Caribbean Cruises Ltd.
RCL
$39.65 (-5.17%) $-2.16
Carnival Corporation Stock Quote
Carnival Corporation
CUK
$8.93 (-6.00%) $0.57
Norwegian Cruise Line Holdings Ltd. Stock Quote
Norwegian Cruise Line Holdings Ltd.
NCLH
$13.18 (-4.56%) $0.63

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