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Why Norwegian Cruise Line Stock Is Slumping This Week

What happened

The cruise industry doesn't appear headed toward a full-blown recovery anytime soon, which is a big reason cruise stocks are unpopular this week. Of these, Norwegian Cruise Line Holdings (NYSE: NCLH) is sinking particularly low, with an 11% decline over the Monday-Thursday stretch.

So what

Last week, cruise stocks were battered by a new analysis from influential investment bank Morgan Stanley. While he wasn't overly pessimistic, analyst Jamie Rollo did write that the anticipated recovery in the industry would occur in the first half of 2022, at the earliest.

Image source: Getty Images.

That continues to dampen the spirits of investors who had previously bid up potential travel industry recovery stories like Norwegian and big rivals Carnival and Royal Caribbean.

Norwegian is notably smaller than those two in many key financial and operational metrics. So its full recovery is less assured, and if that occurs, its bounce back is likely to be slower.

Compounding that, Norwegian has sued the state of Florida. On Tuesday, the company filed a complaint against the state -- an important cruise industry hub -- for prohibiting businesses from requiring proof of COVID-19 vaccination. Earlier this year, the company had set a vaccination requirement for its sailings.

Now what

In the filing, Norwegian characterized its lawsuit as a "last resort," rightly pointing out that it can hardly offer 100% vaccinated cruises without documented evidence of same from passengers.

The desperation behind this move starkly illustrates the challenges still plaguing Norwegian and its peers. It also compounds pessimism about the chances and timing of their recovery.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Carnival. The Motley Fool has a disclosure policy.


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