Why did Carnival, Royal Caribbean and Norwegian Cruise Line dive this week?

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It was a difficult week for cruise ship stocks. Actions of Royal Caribbean International (NYSE: RCL) fell 6% for the week – three times the market slide – and was the relative winner among the three publicly traded cruise lines.

Carnival Corp. (NYSE: CCL) (NYSE: CUK) stocks fell 10%, hampered by the announcement of unavoidable job cuts for the world’s largest cruise operator. Norwegian Cruise Line Holdings (NYSE: NCLH) was once again the biggest lead, posting a double-digit percentage drop for the second consecutive week with a drop of 12% this time. A questionable quarterly report did not help the cause of the smallest of the three cruise lines.

An empty premium Havn deck on an NCL cruise ship.

Image source: Norwegian Cruise Line Holdings.

Rock the boat

The week seemed to start off well with Carnival at the end of an analyst’s upgrade. Ali Naqvi raised his note on the actions of the suspension to purchase, encouraged by positive booking trends, plans to start the first phase of departures in August and recent funding which should allow him to acquire enough liquidity to do it at least in November. Naqvi lowered its price target from $ 45.30 to $ 15.90, but that’s what happens when you haven’t updated a title that has lost 75% of its value since its peak in January .

At the other end of the analyst spectrum, Morgan Stanley’s Jamie Rollo warned on Monday that Royal Caribbean was going to need to raise funds at some point. Rollo, who had withdrawn from the stock due to industry uncertainties, proved to be prophetic. On Wednesday, Royal Caribbean closed the course with $ 3.32 billion in senior secured notes.

Norwegian Cruise Line also raised funds this week, but the new shares in the secondary offering were valued at a high discount compared to their market value. Norwegian would then present its first quarter results, posting a huge loss with charges on a 12% drop in revenues. The next two quarters will be brutal, but that’s also why all the companies have raised billions each in recent weeks.

We are receiving mixed signals about how passengers on canceled crossings are taking the news. The Norwegian conceded in Thursday’s results report that more than half of mixed cruise passengers opt for cash refunds instead of 125% in future credit. This corresponds to the fact that 55% of Carnival customers wanted their money back in March, but Carnival updated this measure this week by saying that only 38% of its canceled passengers were requesting refunds.

It’s still a busy day for industry. Carnival has announced layoffs, holidays and even the departure of its line presidents Seabourn and Holland America. It is not certain that passengers will sail on a cruise ship this summer, and even if they do, we do not know where consumer sentiment or the difficult economy will be.

However, with the three cruise lines who have raised a lot of money lately and reporting that people are starting to make new cash reservations for next year and beyond, it is too early to write off the industry for the moment.



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