Are Carnival, Royal Caribbean and Norwegian starting to sail in different directions?

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For most of the past two months and changes, cruise ship stocks have increased – and largely decreased – together. When Carnival (NYSE: CCL) (NYSE: CUK) stocks move in a given week, Royal Caribbean International (NYSE: RCL) and Norwegian Cruise Line Holdings (NYSE: NCLH) go for the ride. A rising tide lifts all cruise ships?

There was a bit of a discrepancy last week. Carnival’s stock rose 2% for the week, increasing after announcing plans to resume sailing on August 1 on eight ships in three ports in Florida and Texas. The Norwegian plummeted 10% last week, slipping after an SEC filing raised concerns about the cruise line’s ability to continue operating. Royal Caribbean divided the spread, closing with a 2% drop for the week.

A pair of lounge chairs overlooking the path of a cruise ship.

Image source: Getty Images.

Passage of ships

It’s not a bad thing to see the three publicly traded cruise stocks split up. It is actually a healthy sign that the market is finally starting to assess each player on its own merits.

You have to go a long way to find the last time each stock had its own compass. A week earlier had been a great week for all three actions. Carnival and Royal Caribbean increased by 17% and 14% respectively. Norwegian Cruise Line led the way with a 27% pop. All three fell the week before. Carnival and Royal Caribbean recorded identical declines of 5%, and the generally more volatile Norwegian fell 12%.

Last week was the exception to the rule. Investors either love all cruising stocks for a week or they hate them, and despite a strong overall recovery in battered stocks in recent weeks, Wall Street is still a landowner. Norwegian Cruise Line continues to be one of the most affected stocks this year, down 79% in 2020. Carnival and Royal Caribbean fared relatively better, treating their shareholders as cumulative declines of 72% and 70% since the beginning of the year.

The divergence is welcome at this point, because it means that one company will not pay for the sins of another. Will Royal Caribbean and NCL follow Carnival to strengthen their returns to travel with reduced fleets this summer? When Norway releases its quarterly results on Thursday, will each positive or negative piece be interpreted as a gospel for its most important peers?

The cruise line as a whole has taken a hit on its reputation, but each of the three players sails differently. Royal Caribbean released an encouraging note on Friday, noting that reservations for 2021 are in the historical ranges of the past at this time of year, with prices slightly higher. This is in stark contrast to Norwegian’s warning a few days earlier that reservations were down.

The Royal Caribbean update mentioned that only 45% of passengers on its canceled trips were requesting refunds, a welcome improvement to last month’s Carnival update, with 55% of their customers wanting to get their money back.

Investors are at the point where they are starting to discern between the three cruise lines, and this is good news for stock pickers. With a potential upheaval and a looming recession looming, they cannot all be winners, but perhaps we are now seeing that they will not all be losers either.



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