It takes a certain measure of fortitude to maintain a position in Norwegian Cruise Line (NYSE:NCLH). Any semblance of calm was disrupted with the onset of the novel coronavirus. The decline in Norwegian Cruise Line stock has been forceful, leaving some shareholders with what feels like dead weight.
There’s an old saying in the financial markets that a rising tide lifts all boats. This seems to be true, literally and figuratively, as the share prices of the “big three” in the cruise line industry tend to float or sink in tandem.
As you might have guessed, the three companies I have in mind are Norwegian Cruise Line, Carnival (NYSE:CCL) and Royal Caribbean (NYSE:RCL). Oftentimes, when one of these three has a good or bad day, it strongly impacts the other two.
It’s even gotten to the point where companies not directly related to cruise lines are heavily influential on the Norwegian Cruise Line stock price. And without a successful vaccine in the hands of the public, it’s hard to envision a letup in the volatility level of this beaten-down stock.
A Closer Look at Norwegian Cruise Line Stock
Even before we examine the price action of Norwegian Cruise Line stock, there’s a problem that immediately stands out. Specifically, the stock’s trailing 12-month earnings per share is -$9.20.
That number might be more acceptable with a very expensive stock. Yet, Norwegian Cruise Line stock is trading around $16. Investors should look for robust earnings, and evidently Norwegian doesn’t fill the bill in that regard.
Prior to the coronavirus pandemic, Norwegian Cruise Line stock’s primary resistance level was $60. Multiple times over the years, the stock hit its head against that invisible ceiling.
Today, attaining and breaking through $60 is a mere pipe dream for Norwegian Cruise Line stock bulls. Granted, it’s possible to buy and hold the shares in the hopes of getting back to that level someday. That would have to be a very long-term objective, though.
Floating and Sinking Together
As alluded to earlier, investing in Norwegian Cruise Line stock can be challenging and frustrating because its fate is so closely connected to the ups and downs of other companies and their stocks.
The price action that took place on Sept. 18 serves as a case in point. On that day, Norwegian Cruise Line stock declined by nearly 6%. I’ve seen worse, but it’s not fun to take a 6% haircut in a single trading session.
What adds insult to injury is the lack of a catalyst directly related to Norwegian. Nothing bad really happened to the company on that day.
If we must point fingers, the blame can probably be placed on Carnival. That company’s subsidiary, P&O Cruises, had recently announced that it will extend its cruise halt through January of 2021.
Thus, Norwegian’s investors have to worry about not just a single company, but also the issues besetting other companies.
As if that’s not a big enough problem, investors in Norwegian Cruise Line stock have to deal with negative analyst opinions. A particularly painful evaluation recently came from Moody’s, which downgraded Norwegian’s Corporate Family Rating to “B2” and the company’s Probability of Default Rating to “B2-PD.”
But the biggest contributing factor will undoubtedly be the discovery and distribution of a successful Covid-19 vaccine. That, like the other aforementioned factors, is out of Norwegian’s control.
For instance, not long ago, AstraZeneca (NYSE:AZN) reported some unfortunate news concerning its Covid-19 vaccine candidate, AZD1222. Evidently, a patient had an adverse reaction and the Phase 3 clinical trial was subsequently put on hold.
All of the “big three” cruise lines’ stocks declined that day. This is not unexpected as the fate of the cruise line industry is so heavily dependent on a Covid-19 vaccine emerging so that passengers can feel safe again.
The Bottom Line
Navigating the choppy waters of the cruise line market is challenging in the wake of Covid-19. A slew of external forces, including delays in the development of a vaccine, will make it difficult to profit from a position in Norwegian Cruise Line stock for the foreseeable future.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.