Why Norwegian Cruise, Carnival Corporation and Royal Caribbean Stocks all sank on Monday

What happened

Cruise line stocks are booming as the trading week begins. At noon EST Monday, shares of Norwegian Cruise Line Holdings (NYSE: NCLH) are down 4%, Carnival corporation (NYSE: CCL) (NYSE: CUK) is down 5.9%, and Royal Caribbean (NYSE: RCL) is down 6%.

But it’s Carnival that’s bringing the whole industry down.

So what

This morning, the world’s largest publicly traded cruise line announced a new round of “ship-specific cruise cancellations and movements.” Among the new developments, three cruise ships – Carnival Magic, Carnival Paradise and Carnival Valor – will be dry-docked until November 2021, and cruises aboard these ships that were scheduled to begin in June will now be. 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 struggling. As Barron’s noted on Friday, cruises on the three major cruise lines are not expected to resume until the fourth quarter of 2021, or even early 2022.

Now what

Carnival’s announcement this morning appears to support this bearish prognosis.

Casting cold water on bullish investors who cited increased bookings for 2021 cruises as cause for optimism, analysts cited by Barron at Truist Securities warn that “we now view July as the better This suggests that cruise lines, which have now uniformly canceled all cruises out of U.S. ports through the end of April, may very well be forced to postpone the cruise multiple times even as spring and summer approach. summer.

What does this mean for investors? Choppy waters, to borrow a phrase. If Truist and Barron are correct, then we seem to be envisioning a scenario where cruise stocks could be auctioned multiple times in anticipation of the upcoming end of cruise suspensions and / or number updates. reservations, only to remove the carpet from under investors, as these cruise suspensions stretch further and further into the calendar year.

Adding to investor consternation, as cruise lines realize they won’t resume cruising as soon as they hoped, they may have to issue more shares to raise more cash, diluting thus the shareholders.

At the time of the cruise Is and as Carnival, Norwegian and Royal Caribbean become profitable again, those profits could turn out to be much slimmer than investors expect today.