Although virtually every industry suffered an initial correction due to the coronavirus pandemic, few sectors have suffered like the cruise liner industry, which saw individual competitors like Norwegian Cruise Line (NYSE:NCLH) suffer catastrophic losses. Due to multiple government bodies shutting down non-essential activities, NCLH stock had little recourse but to depend on risk-tolerant investors speculating on a return to the high seas. That happened but will it be enough?
As of this moment, investors focused on the broader travel industry have some good news to depend on. According to Cruise Industry News, 13 ships under the Norwegian umbrella are now back in service, with three more vessels soon to return. More significantly, an argument can be made that tourists and vacationers are ready to reclaim their normal activities.
Back in December of last year, CNBC reported that Americans are increasingly tired of Covid-19, more specifically the governmental responses that have impacted their lives. What’s more, a U.C. Davis Health article noted that just months into the lockdowns and mitigation measures, Americans were already suffering from Covid fatigue. Likely, the rest of the world isn’t all that different, which indirectly bodes well for NCLH stock.
However, it can also be the return of the SARS-CoV-2 virus that unsettles the cruise ship industry. Lost amid the mainstream media’s coverage of Russia’s war in Ukraine is China’s own battle against surging coronavirus cases. But rather than live with Covid-19, the Chinese government has imposed a binary response: do anything and everything possible to wipe out Covid-19 for good.
This draconian response includes locking down Shanghai, one of the most important cities for China. According to a Bloomberg report, Shanghai contributes 3.8% to its underlying nation’s GDP. Given that the pandemic has severely disrupted growth outlooks for every developed nation immediately following the outbreak, Beijing’s willingness to sacrifice one of its workhorses is odd, if not outright worrisome.
While it’s pure speculation at this point, China’s severe response to the Covid-19 threat indicates that perhaps the SARS-CoV-2 virus is more serious than we would like to believe. To be fair, you don’t want to make heavy bets on epidemiological speculation. However, it’s an important factor to consider if you’re thinking about NCLH stock.
On the date of publication, Josh Enomoto 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.
