Cruise stocks are not escaping the pressure, even with a notable rebound in travel trends. Many cruise stocks are higher today, the first trading session after the long July 4th weekend. However, that does little to erase the pain they’ve experienced this year. In fact, today’s move is likely just an oversold bounce for the group.
Right now, Carnival (NYSE:CCL) stock is up more than 6% on the day. However, shares are still down 52% over the last three months. Meanwhile, Royal Caribbean (NYSE:RCL) stock and Norwegian Cruise Line (NYSE:NCLH) stock are up 3% and 9%. They’re also down 53% and 40% so far in 2022, respectively. All three stocks are down roughly 60% (or more) from their 52-week highs as well.
For what it’s worth, Carnival is the worst-performing name in the bunch. CCL stock was also recently the target of a bearish analyst note. Morgan Stanley analyst Jamie Rollo cut his price target to $7 per share. In his bear-case analysis, Rollo said shares could even go to $0 if there is a “demand shock.”
Travel Trends Are Rebounding
With a chaotic, busy summer of travel, we’re starting to see some travel stocks trying to bottom.
For one, airports feel busier than ever due to staffing shortages. They’re also almost back to pre-pandemic numbers. From June 28 to July 4, the Transportation Security Administration (TSA) passed 15.62 million flyers through security. That’s more than 90% of the 17.05 million recorded over the same seven-day stretch in 2019.
Flying isn’t the only way to travel, either. Despite near-record gas prices, an estimated 47.9 million people traveled 50-plus miles from home over the holiday weekend. According to the American Automobile Association (AAA), that nearly touches the levels from 2019.
So, what does all of this have to do with cruise stocks?
Will the Rally Last for Cruise Stocks?
Investors have seen the bear market and fears of a recession trickle into all sorts of travel sectors. Cruise stocks, airlines, hotels, booking sites, ride-hailing services and more have been decimated. However, investors shouldn’t be surprised. If a company with strong cash flows, a solid balance sheet and less economic sensitivity is seeing its stock sell off, cruise stocks should certainly be selling off, too.
Although it flies in the face of the trends taking place right now, the market has a way of looking six to 12 months in advance — and things don’t appear very optimistic. So, in that sense, the market doesn’t care about the travel trends right now. Instead, it cares about what they will look like in the fourth quarter of 2022, Q1 2023 and beyond.
As analysts have already telegraphed, debt and potential demand shock could weigh on cruise stocks. That’s why these stocks have struggled so much lately. It’s also why this rebound may be nothing more than a bear-market bounce.
On the date of publication, Bret Kenwell did not hold (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.