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Why Royal Caribbean, Carnival, and Norwegian Cruise Stocks Just Popped

By Rich Smith – Jan 3, 2022 at 9:04AM

Key Points

  • Rock: The FDA just expanded the age range of those eligible for COVID-19 vaccine boosters.
  • Paper: Last week, the CDC told everyone to "avoid cruise travel, regardless of vaccination status."
  • Paper beats rock, and cruise stocks' Monday rally could get cut short.

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The FDA just approved boosters for the 12- to 15-year-old demographic -- but the CDC still recommends that everybody avoid cruise travel.

What happened

Shares of cruise line operators Royal Caribbean (RCL 0.90%), Carnival (CCL -0.10%), and Norwegian Cruise Line Holdings (NCLH 1.36%) sailed into 2022 with a strong tailwind Monday. As of 1:47 p.m. ET, Royal Caribbean shares were enjoying a 4.9% gain.

Carnival and Norwegian were doing even better -- up 6.3% and 6.8%, respectively.

Rock Paper Scissors diagram of what beats what.

Image source: Getty Images.

So what

It's not too hard to guess why. On Monday morning, the Food and Drug Administration announced that it had extended its Emergency Use Authorization for Comirnaty: 12- to 15-year-olds are now eligible to receive booster doses of the COVID-19 vaccine developed by Pfizer (PFE 1.04%) and BioNTech (BNTX 1.63%).  

Additionally, the FDA has shortened the time those young people must wait between completing their initial rounds of vaccinations and receiving the booster shots from six months to just five months.

Finally, the FDA approved boosters for kids as young as 5 if they have some conditions that render them immunocompromised.

Now what

This is kind of a good news/bad news situation. On the one hand, making boosters available to the 12-and-up crowd will increase the number of potential passengers who could cruise with Carnival, Royal Caribbean, and Norwegian. And the move to allow those as young as 5 to get boosted if they are members of an especially at-risk portion of the population probably foreshadows a similar expansion for all kids 5 and up, eventually.

And yet, on the other hand, cruise companies and their shareholders must still contend with the fact that last week, the U.S. Centers for Disease Control and Prevention stated flatly that given the current pandemic situation, people should "avoid cruise travel, regardless of vaccination status."  

I repeat, regardless of vaccination status.

As in, regardless of whether the FDA lets kids get booster shots.

And despite the fact that just now, it seems that traders in cruise company stocks disagree with me, I think that the second point is more significant.

In this game of governmental agency rock-paper-scissors, I'm afraid that the CDC's stark warning will act as "paper," topping the FDA's "rock"-hard assurance that boosters are safe for kids. And so long as the CDC is telling people that cruising isn't safe even for the vaccinated, a lot of folks who might otherwise have booked a trip are going to stay ashore.

As such, for the time being, I'd suggest that it's safest to avoid all three of these stocks.

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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