The rapidly spreading coronavirus from China has inflicted heavy damage on Wall Street, where stocks have taken a 25% beating over the past month on concerns that the virus will slow the global economy to a screeching halt. But, few stocks have been hurt as bad by the coronavirus as cruise line stocks.

From their early 2020 highs, several cruise line stocks have dropped by 70% … or more. Indeed, these three cruise line stocks have been decimated in 2020:

• Carnival (NYSE:CCL) -69.1% year to date
• Royal Caribbean (NYSE:RCL) -76.9%
• Norwegian Cruise Line (NYSE:NCLH) -82.1%

Many contrarians think that this bloodbath might be a golden buying opportunity into the sector. They reason that the coronavirus pandemic is fleeting. It’s bad today. But it will pass within the next few months. Sure, cruise demand will take a huge hit over the next few quarters. But, because consumers have a short memory, cruise demand will rebound to semi-normal levels by 2021/22 as the virus becomes old news.

When it does, beaten-up cruise stocks will rebound furiously.

That may happen. But investors should remember that while panics pass, memories have a tendency to linger.

From this perspective, it may take awhile for cruise demand to normalize, and in the meantime, the huge leverage on these companies’ balance sheets will make investors nervous about potential bankruptcy.

In other words, while buying cruise line stocks could pay off hugely in three to five years, conditions for this group will likely get worse before they get better.

With that in mind, let’s take a look at three cruise line stocks that have been hammered by the coronavirus, and where these stocks look positioned to go next.

Cruise Line Stocks That have been Crushed: Carnival (CCL)

Year-to-Date Decline: 69.1%

Of all the cruise line stocks getting crushed by the coronavirus, the one that looks the most attractive as a potential “buy the dip” candidate is Carnival. And that’s despite the company operating the infamous Diamond Princess ship, which had more than 700 COVID-19 infections on board.

Why is Carnival stock the best cruise line stock despite that bad publicity? Three big reasons.

First, this is the biggest cruise line operator. Coming into the year, Carnival had a $34.8 billion market cap, about 25% higher than any other cruise line company. Carnival also reported revenues in 2019 of nearly $21 billion, about double that of anyone else in the industry. In crisis times like these, size matters to help buffer against losses.

Second, the company has big profits. Last year, Carnival reported $3.3 billion in operating profits. Sure, that number will come down in a big way in 2020. But, it’s a big enough number that there’s ample wiggle room for profits to come down substantially and still remain in positive territory.

Third, Carnival has the best balance sheet in the group. Yes, the company has the most debt in the entire industry, at $11.3 billion in total debt. But, Carnival also has the most cash ($518 million), and its net-debt-to-operating-profit ratio stands at an industry low 3.3X.

Overall, then, if you were ever going to buy a cruise line stock, CCL is the one to buy. But, I still think the worst is yet to come here, so I’d stay on the sidelines for now.

Royal Caribbean (RCL)

Year-to-Date Decline: 76.9%

Next to Carnival, Royal Caribbean is the other cruise line stock which, when the time comes, could be a good buy on the coronavirus plunge.

Royal Caribbean is the second biggest cruise line operator in the world. The company operates at industry-best 19% operating margins, and produced an industry-best near $700 million in free cash flow last year. Sure, the balance sheet is loaded with debt ($9.4 billion in net debt). But, the company’s 4.5-times net-debt-to-operating-profit ratio in 2019 is decent for this industry.

Overall, then, Royal Caribbean appears to be well capitalized enough with large enough profit margins to weather the coronavirus storm.

Does that mean the 77% selloff in RCL stock is overdone? In the long-term, yes. RCL stock will likely be way higher in three to five years, than where it sits today.

But, in the near-term, things will get worse before they get better. More COVID-19 cases will be reported in the coming weeks. Continued spread will spark continued selling, and RCL stock will ultimately head lower.

Norwegian Cruise Line (NCLH)

Year-to-Date Decline: 82.1%

Of the major cruise line stocks, the one that looks like the least compelling “buy the dip” candidate is Norwegian Cruise Line.

That’s for a few reasons. First, the company is way smaller than its peers. Today, its market cap sits at a mere $2.3 billion, versus $6.4 billion for Royal Caribbean and $11.2 billion for Carnival. Less size means less resources to weather the coronavirus storm, and a higher risk of bankruptcy.

Concurrently, the company has the worst balance sheet in the industry. Sure, the debt load is smaller at just $6.5 billion in net debt. But, with operating profits down around $1.2 billion, the net-debt-to-operating-profit ratio at Norwegian measures up around 5.5. That’s almost double Carnival’s net debt ratio, and means that Norwegian has a much higher risk of insolvency than other cruise line operators.

To be sure, NCLH stock also offers more upside potential in the event things get better. After all, the stock is down 82.1% year to date, and trades at 2.6X forward earnings.

But, the stock has fallen so hard to dirt-cheap valuation levels for a reason: bankruptcy is a real risk here. As such, the stock looks too risky to touch right now, but may be worth considering if/when cruise line demand trends rebound.