what happened
Shares in cruise shares jumped Friday after a major insider made a positive comment. Shares of Carnival (NYSE: CCL) (NYSE: CUK) increased by 7.7% earlier and increased by 6% at 13:00 EST. Norwegian Cruise Line (NYSE: NCLH) rose 6.8% and is now trading 5.4% higher. And Royal Caribbean Cruises (NYSE: RCL) traded 6.1% higher and is now 4.1% higher.
This follows a strong week for cruise line shares on optimism about the effectiveness of COVID-19 vaccines and Carnival concluding a $ 3.5 billion round of funding.
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Approximately
The most notable news today was from Arnold Donald, CEO of Carnival, who said he thinks most of his fleet will be operational by the end of 2021. At worst, he thinks the full fleet will be in early 2022.
A major uncertainty for cruise lines was when they would be able to act again. The longer the pandemic keeps people out of business, the more companies have to keep their business going and the more uncertainty when the payback to shareholders will come. If Donald recovers quickly by the end of 2021, it is very positive for the industry.
It is not clear exactly what a repair for cruise lines will look like. Vaccines are expected to be widely available in the United States by the summer, and some companies are considering making vaccines that allow more open movement than current restrictions. This may also be possible on cruise lines, where passenger safety will not only be a priority for operators, but it will be the key to getting customers on board.
Now what
There is still a lot of uncertainty for cruise line operators, but it is becoming increasingly clear that brighter days lie ahead. In summer, more capacity can hit the waters, and if Carnival is right, the industry could be full by winter.
The most important way to alert investors is how fast demand is returning. It has been rumored that the pent-up demand could lead to a roaring twenties-style recovery for discretionary consumers, which would be ideal for entertainment and holiday businesses such as crossovers. Both usage and prices could be high if the pandemic ends soon.
As much as the market today dispels these remarks, we previously hoped to recover, so caution is in order. Demand can be weak if customers do not want to risk the risk of going on a cruise ship, and the operators may have to aggressively price to attract customers. And with billions of additional pandemic-related debt on their balance sheets, all three companies are more risky than a year ago. For now, the market likes that there is some kind of light at the end of the tunnel.