Investors paying attention to the market today may have noticed that cruise stocks are feeling some pain. Indeed, these stocks are down substantially on higher-than-normal volume. With this in mind, you may be wondering what is responsible for this downside.
After all, cruise stocks have been otherwise strong performers of late. The reopening thesis remains a powerful force in this sector. And a return to normal — which many have anticipated will come sooner than expected — has begun to play out.
That said, Norwegian Cruise Lines (NYSE:NCLH), Royal Caribbean (NYSE:RCL), and Carnival (NYSE:CLL) are all down between 5% and 7% today.
Let’s take a look at what’s driving cruise stocks lower today.
Why Are Cruise Stocks Down Today?
Today’s significant move to the downside is being driven by a report that two passengers aboard the Adventure of the Sea cruise ship operated by Royal Caribbean tested positive for Covid-19.
The guests were under the age of 16 and were unvaccinated. Nonetheless, concerns around the prevalence of Covid-19 in close quarters such as cruise ships has begun to spark up. Concerns that cruise lines could see cruises halted from here is a serious one. And today, it appears investors are pricing in this risk more heavily than before.
Cruise operators have enacted various protocols to limit the potential for exposure to the coronavirus, and to meet regulatory requirements for resuming sailing. While this remains an isolated incident, today’s price action with cruise stocks suggests investors are still wary of the recovery thesis with these names. Indeed, should more reports surface of positive tests, regulatory oversight may play a role in slowing the rapid acceleration in cruises investors are pricing in right now.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
