[ad_1]
What happened
Cruise line stocks surged on Friday after some positive comments from a major industry insider. Actions of Carnival (NYSE: CCL) (NYSE: CUK) were up 7.7% earlier and 6% at 1 p.m. EST. Norwegian Cruise Line (NYSE: NCLH) was up 6.8% and is now trading 5.4% higher. And Royal Caribbean Cruises (NYSE: RCL) traded 6.1% higher and is now up 4.1%.
This follows a good week for actions by cruise lines on optimism about the effectiveness of COVID-19 and Carnival vaccines closing a $ 3.5 billion funding round.
Image source: Getty Images.
So what
The most notable news today is that of Carnival CEO Arnold Donald, who said he believes “most, if not all” of his fleet will be operational by the end of 2021. At worst, it believes that early 2022 will see the entire fleet active.
A big uncertainty for cruise lines has been when they can return to action. The more the pandemic prevents people from taking cruises, the more companies have to keep their businesses afloat and the more uncertainty there is about shareholder profitability. If Donald sees a rapid recovery by the end of 2021, that’s extremely optimistic for the industry.
It’s unclear exactly what a recovery will look like for cruise lines. The vaccines are expected to be widely available in the United States by the summer, and some companies are considering switching to vaccines that would allow more open movement than current restrictions. This could also be possible on cruise lines, where passenger safety will not only be a priority for operators, it will be essential in getting customers to board ships.
Now what
There is still a lot of uncertainty for cruise lines, but it is becoming increasingly clear that brighter days are ahead. In the summer, more capacity could reach the waters, and if Carnival is right, the industry could be at full speed by the winter.
What will be critical for investors to watch is how quickly demand will return. It is said that pent-up demand could lead to a frantic 1920s recovery for consumer discretionary stocks, which would be ideal for entertainment and vacation companies like cruise lines. Usage and prices could be high if the pandemic ends soon.
Even as the market clarifies these comments today, even though we had hopes of a recovery before, caution is in order. Demand may be low if customers don’t want to risk getting on a cruise ship, and operators may have to set aggressive prices to attract customers. And with billions of additional pandemic-related debt on their balance sheets, all three companies are riskier than a year ago. Right now, the market likes that there is some kind of light at the end of the tunnel.
[ad_2]
Source link