Please ensure Javascript is enabled for purposes of website accessibility

Why Cruise Ship Stocks Are Falling Harder Than the Market Today

By Rich Duprey - Jun 28, 2021 at 1:06PM

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

The cruise industry still has not found safe harbor from the coronavirus storm.

What happened

Shares of cruise stocks Carnival (CCL -5.39%) (CUK -6.03%), Norwegian Cruise Line Holdings (NCLH -10.57%), and Royal Caribbean (RCL -5.62%) were all falling in midday trading Monday, with Carnival down 6.7%, Norwegian falling 5.7%, and Royal Caribbean off 6.3% on a day when no major index was down more than a fraction of a percentage point.

So what

Carnival announced it was selling up to $500 million worth of stock, which it mostly intends to use to repurchase shares trading in the U.K., but also for other corporate purposes. The cruise ship operator has had to raise of $2.5 billion to remain afloat while the industry was stuck in a lockdown for over a year, jeopardizing the viability of all operators.

Wave striking the bow of a ship

Image source: Getty Images.

While cruise lines have now been largely given the go-ahead to resume sailing out of the U.S., albeit with limited capacity, they're expected to continue burning cash until normalcy can return, arguably not until late 2022 or 2023.

Last week, Royal Caribbean set sail from Fort Lauderdale, the first cruise out of the U.S. since the pandemic halt began. But two unvaccinated passengers under 16 years of age tested positive for COVID-19. The cruise operator notes 92% of its guests are vaccinated, and those who are not are under 16. All of its crew members are vaccinated as well, it says.

Now what

More debt, more dilution, and lingering coronavirus news is likely weighing on all three cruise lines, including Norwegian, which -- as the industry's smallest operator -- can't afford to have its sailing plans disrupted.

The industry will undoubtedly remain in choppy waters for some time, and bad news for one will likely hurt them all.

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

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
$9.47 (-5.39%) $0.54
Royal Caribbean Cruises Ltd. Stock Quote
Royal Caribbean Cruises Ltd.
$37.97 (-5.62%) $-2.26
Carnival Corporation Stock Quote
Carnival Corporation
$8.57 (-6.03%) $0.55
Norwegian Cruise Line Holdings Ltd. Stock Quote
Norwegian Cruise Line Holdings Ltd.
$12.10 (-10.57%) $-1.43

*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 08/09/2022.

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.