Why Norwegian Cruise, Carnival Corporation and Royal Caribbean shares collapsed this morning

What happened

Reports of an incredibly effective new coronavirus vaccine from Pfizer on Monday helped push cruise stocks out of port. At the time the trading was completed for the day, the shares of Norwegian Cruise Line Holdings (NASDAQ: NCLH) stocks increased by almost 27%, Royal Caribbean (NYSE: RCL) had gained nearly 29%, and Carnival corporation (NYSE: CCL) had climbed more than 39%, with investors betting the cruise will resume soon.

Today, however, cruising stocks are dropping those gains. A report on Norwegian Cruise Line’s miserable results, followed by an announcement that Carnival was cashing in yesterday’s stock surge with a $ 1.5 billion stock offering, sent both stocks tumbling – forming a whirlpool effect and aspiring Royal Caribbean at their side. As of 10:40 a.m. EST, Carnival’s stock is down 11.5%, Norwegian 8.7%, and – through no particular fault – Royal Caribbean is down 4.8%.

Image source: Getty Images.

So what

Is it right? Consider the facts.

With its ships still tied up in port and unable to navigate, Norwegian has virtually no revenue to offset its expenses and only took in $ 6.5 million last quarter from $ 1.9. billion in the third quarter of the previous year. Inevitably, this resulted in a loss of $ 2.50 per share. And unfortunately for Norwegian Cruise investors, it was a bigger loss than Wall Street analysts predicted.

At Carnival, stocks fall for a different reason. Taking advantage of a stock price that will net him 39% more cash when selling shares than he would have gotten on Friday, Carnival announced today that it will sell up to $ 1.5 billion actions. On the one hand, the extra money will come in handy as Carnival waits for a preparation period and performs “mock trips” before receiving clearance from the CDC to resume the cruise. On the flip side, Carnival shareholders can expect to be diluted an additional 10% of their stake in the company while waiting for that to happen, and they are apparently not thrilled with that.

Now what

And of course, Royal Caribbean’s stock is also shrinking – not as much as its cruise-operating peers, of course. But you have to be wondering: if Norwegian Cruise Line Holdings just reported a bigger loss than expected and Royal Caribbean is in a similar situation, could that mean that the next batch of Royal Caribbean earnings news will also be? bad?

Not immediately, it will not be. Royal Caribbean just released results two weeks ago, after all, and another report won’t be released for two and a half months, giving Royal Caribbean time to right the ship before reporting again. But even if the company’s shareholders dodge this particular bullet, what are the odds that Royal Caribbean will follow Carnival’s lead and issue a large batch of shares to capitalize on yesterday’s windfall?

It’s a risk investors can’t afford to ignore, and maybe that’s why they’re selling today – to cash in on Monday’s cruise stock rally before Royal Caribbean does. can. With Pfizer’s vaccine approved in weeks, distribution in months, and enough large distribution to eliminate the virus maybe a year or more in the future, I can hardly say I blame them.