Cruise ship operators have been among the businesses hardest hit by the pandemic, and it could still be months before companies start putting their ships back on the water. Carnival (NYSE: CCL), Royal Caribbean Cruises (NYSE: RCL), and Norwegian Cruise Line Holdings (NASDAQ: NCLH) would probably have everything to gain from a viable vaccine to fight COVID-19. This is what drives gains of 12% to 16% in these stocks, and there could be even greater gains if more progress towards a permanent solution is made.
Volatility Makes Shareholders of Cruise Ships Sinking
To a certain extent, the entire stock market is on pins and needles with each new event related to the coronavirus. This has been amplified in the cruise industry, which remains largely closed until companies can demonstrate that they can find a safe and efficient way to operate in today’s environment.
Looking at the oscillations that Carnival, Royal Caribbean and Norwegian have recently gone through:
- Last Wednesday, cruise ship operators saw their actions soar to news from Norway and the Royal Caribbean that they were working hard to develop safety protocols that would allow them to operate safely. security even without a permanent solution to COVID-19.
- Friday brought more gains to the industry as Carnival announced strategic measures designed to improve its liquidity and potentially reduce the rate at which the cruise line burns in its current treasure.
- Cruise stocks were down sharply on Monday when the state of California turned its plans on reopening and resumed restrictions on parts of the state’s economy.
However, when you balance the ups and downs, they tend to represent only modest progress for shareholders. The Norwegian, Royal Caribbean and Carnival are all far from their March and April lows, but they haven’t recovered much of their initial losses since the start of 2020 either.
What is the next step for cruise stocks?
Investors hope things could return to normal if a COVID-19 vaccine were discovered. However, it is still far away and the three main operators have yet to go through a long period of closings.
The cost of raising capital has become extremely high. Carnival recently said it would seek to borrow another billion dollars, but investors expect double-digit interest rates to entice bond buyers to take the risk.
Ultimately, cruise lines must come up with plans for every eventuality. If the coronavirus persists for a period of time, it will have to take measures such as the operation of vessels with reduced capacity and the improvement of health and safety facilities on board the vessels. They will also have to continue to give their passengers a lot of flexibility by allowing them to freely cancel and book their trips in all uncertainty.
Until the COVID-19 pandemic begins to improve, cruise ship stocks will remain under pressure. Shareholders are looking for a vaccine to solve all of their problems, but it may not arrive in time to avoid lasting financial damage to Carnival, Norwegian and Royal Caribbean.