- Cruise stocks are down significantly today, with the “big three” losing more than 10% in afternoon trading
- These losses are currently led by Norwegian (NYSE:NCLH), which is down 12% at the time of writing
- This cruise line announced the suspension of Asian cruises for seven months yesterday
It’s a sea of red in the overall markets today. However, for cruise stocks, it’s an absolute bloodbath.
Shares of popular cruise lines Norwegian (NYSE:NCLH), Royal Caribbean (NYSE:RCL) and Carnival (NYSE:CCL) are all down more than 10% at the time of writing. These losses vastly outpace those of the broader markets. Accordingly, something appears to be amiss in this sector.
Norwegian has led losses for most of today after a big announcement yesterday. The company has decided to forego all cruises in Asia from Oct. 11, 2022 through April 25, 2023. The loss of seven months of sailing, in the midst of a recovery that was banking on this growth, isn’t good for investors.
Now, the company has stated that it will be repositioning its cruises. While it’s unclear if all these cruises can be made up elsewhere, the lack of global presence in a key growth area of the world for a significant period of time has investors worried. Royal Caribbean and Carnival have sold off in concert on this news.
Let’s dive into this announcement for investors considering whether this is a buy-the-dip opportunity, or a good time to jump ship.
Is Now the Time to Buy Cruise Stocks?
This announcement probably couldn’t come at a worse time for the cruise sector. Investors have already downgraded growth forecasts, as the global consumer comes under pressure from inflation. While bookings remain high, it’s unclear how many folks will actually follow through. And there’s still the potential for pandemic outbreaks on the horizon — it’s not smooth sailing yet.
Cruise stocks have benefited from a pandemic reopening thesis through early last year. However, over the past year, most cruise stocks are well down from their highs. That’s partially because the numbers don’t add up anymore for many fundamentals-oriented investors.
Cruise lines took on tremendous debt to stay alive during the pandemic-related shutdowns. While cruises are resuming, capacity issues have hampered profitability. And hiring has been more difficult. These are all functions of the state of the global employment market.
Should the global consumer weaken, as recent economic data suggests, cruise stocks could be in for tough sailing ahead. Today, the market is pricing in additional geopolitical concerns. It appears these concerns are the straw that has broken the back of this sector.
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.