Cruise stocks are racing higher on Wednesday, with the top names all up nicely on the session. As of this writing, Norwegian Cruise Line (NYSE:NCLH) is up 8%. Meanwhile, Royal Caribbean (NYSE:RCL) and Carnival Cruise (NYSE:CCL) are both up more than 5%. With today’s rally, cruise stocks across the board are well off their lows. In fact, at today’s highs, all three stocks shot up more than 30% from their 2022 lows.
This morning, Jefferies analysts also noted that prices have been “stabilizing at higher levels,” pointing out notable strength in luxury cruise options. That builds on the idea that experienced cruise-goers will continue to cruise, helping fuel the current move higher. According to a recent survey, 91.4% of surveyed travelers “reported they plan to take a cruise within the next year.” Meanwhile, 2.5% said they would not cruise in the next year. The remaining 6.1% are still undecided.
Interestingly, though, cruise stocks lacked upside momentum despite soaring travel trends toward the beginning of summer. In fact, NCLH, RCL and CCL all hit new 2022 lows in June or July.
Can Cruise Stocks Maintain Momentum?
The concern here is simple: Is this news really news or are cruise stocks just bouncing with the overall market?
Well, the survey above is positive, but it’s not surprising. After all, 69% of the survey’s participants reported that “they have previously been on at least seven or more sailings.” So, it’s no shock that many plan to cruise again.
Further, all three of these cruise stocks traded higher when they last reported earnings in the past few months. Travel trends have also remained strong. Plus, other research points to expectations for a continued strong recovery in cruise lines. Apparently, “the industry could soon show more substantial rebound numbers than other travel segments, setting the stage for cruising to surpass pre-pandemic numbers.”
Despite all of this good news, though, cruise stocks also didn’t catch much reprieve until the overall market turned around. That suggests they may be vulnerable if the market rolls over again.
The Bottom Line
Looking forward, investors should keep in mind that the impact of the broader stock market was a driving force for cruise stock earlier this year. That means it could be a driver in the second half of the year, too.
As the good news continues to build for these companies, cruise stocks certainly have more potential. However, back when the market struggled for upside, cruise stocks struggled as well.
Names like CCL, RCL and NCLH are seeing a relief rally alongside the market at large. While they do admittedly have more upside momentum, they also have much more downside than the broader market.
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.
