what happened
The stock line’s shares increase sharply as the trading week progresses. As of noon EST Monday, shares of Norwegian Cruise Line Holdings (NYSE: NCLH) is 4% lower, Carnival Corporation (NYSE: CCL) (NYSE: CUK) is 5.9% lower, and Royal Caribbean (NYSE: RCL) is even 6% lower.
But it is Carnival that is pulling the whole sector lower.
Image Source: Getty Images.
Approximately
This morning, the largest in the world traded cruise line announced a new series of “ship-specific cruise cancellations and movements”. Under the new developments, three cruise ships – Carnival Magic, Carnival Paradise and Carnival Valor – will be laid in the dry dock until November 2021, sailing on board these ships, which would have already started in June. be canceled.
And that’s the good news.
Carnival may be the catalyst for today’s sale, but it’s not the only cruise line experiencing problems. As Barron noted on Friday, cruises aboard all three major cruise lines are not expected to resume before the fourth quarter of 2021, or even early 2022.
Now what
Carnival’s announcement this morning apparently supports the clumsy forecast.
Barron says analysts at Truist Securities warn that ‘we now see July as the cold water after bullish investors who indicated the increase in bookings for 2021 cruises as a reason for optimism. best case for restart “(emphasis). This suggests that cruise lines, which have now uniformly canceled all voyages from US ports until the end of April, could very well have been forced to postpone the voyage repeatedly, even if the spring a summer.
What does this mean for investors? Choppy waters, to borrow a phrase. If Truist and Barron’s are right, it looks like we’re looking at a scenario in which cruise stocks could repeatedly bid in anticipation of an impending end to the cruise suspension, and / or updates of booking numbers, just to get off the mat to draw. from among investors, as the suspensions in the trade extend further back into the calendar year.
To increase investors’ dismay, the cruise lines will realize that they will not start sailing again once they had hoped. They may need to issue more shares to raise more cash, which will dilute shareholders in the process.
By the time we sail do resumes, and Carnival, Norwegian and Royal Caribbean become profitable again, it may appear that profits are much thinner than investors expect today.