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Why Cruise Line Stocks Jumped Again on Tuesday



a close up of a boat: Why Cruise Line Stocks Jumped Again on Tuesday


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Why Cruise Line Stocks Jumped Again on Tuesday

What happened

Fresh off their vaccine-fueled share price rally Monday, cruise line stocks set sail again on Tuesday, with shares of Norwegian Cruise Line Holdings (NYSE: NCLH), Royal Caribbean (NYSE: RCL), and Carnival Corporation (NYSE: CCL) rising 5.1%, 6.1%, and 9%, respectively, in 11:40 a.m. EST trading.

But what exactly is it that’s helping cruise stocks to power ahead this time?



a close up of a boat: An illustration of a cruise ship heading toward a partially submerged coronavirus particle


© Getty Images
An illustration of a cruise ship heading toward a partially submerged coronavirus particle

So what

The easy answer is probably the right one. As of yesterday, American travelers now have a total of three high-profile vaccine candidates to potentially choose from, each of which boasts data showing it to be as much as 90% effective at staving off COVID-19 — or even higher. Additionally, Regeneron announced over the weekend that the U.S. Food and Drug Administration has granted Emergency Use Authorization to its REGEN-COV2 treatment for patients who have already contracted the novel coronavirus, to help them get well again.

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All of this is obviously good news for investors hoping that the cruise industry will eventually revive, with vacationers resuming cruising at some point in the future. On top of this, last week, Norwegian Cruise announced the successful sale of 40 million shares of stock to raise the cash it needs to enable it to survive to that point. And this morning, Carnival made a similar announcement, confirming that it has sold 10.4 million shares of stock at $17.59 apiece to one of its lenders. Carnival intends to use the proceeds of this stock sale to repurchase $90.8 million in debt from said lender, pushing its own bankruptcy fears a bit further into the future.  

Now what

Video: Market ‘tug-of-war’ with Covid-19 may limit downside, $7.2B money manager says (CNBC)

Market ‘tug-of-war’ with Covid-19 may limit downside, $7.2B money manager says

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And again, all of this is good news for cruise line stocks — I want to make that clear. But at the same time, it’s arguably not the most important news this week.

The most important news, I fear, is the news I mentioned yesterday: That the U.S. Centers for Disease Control and Prevention (CDC) has just raised the warning level on the health risk of cruise travel to Level 4 — the most strident one possible — indicating a “very high level of COVID-19” risk for cruisers.

It is now the official advice of the CDC that vacationers do not take cruises, and the agency in fact “recommends that all people avoid travel on cruise ships, including river cruises, worldwide, because the risk of COVID-19 on cruise ships is very high.”  

Until the CDC changes its opinion on that point, I cannot fathom it giving official permission to any individual cruise line actually resuming cruising (despite what it has said in the past). Until it changes its opinion on that point, the cruise industry’s own private recession is almost certain to drag on.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Carnival. The Motley Fool has a disclosure policy.

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