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Why Carnival, Royal Caribbean, and Norwegian Cruise Line Stocks Sank Today

What happened

Cruise ship stocks fell on Monday after surging COVID-19 case counts forced government officials in California to reverse some of the state's economic reopening plans.

By the close of trading, shares of Royal Caribbean (NYSE: RCL) and Norwegian Cruise Line Holdings (NYSE: NCLH) were down 4.3% and 4.9%, respectively. Carnival's two stocks Carnival Corporation (NYSE: CCL) and Carnival Plc (NYSE: CUK) were down 5.5% and 4.8%.

So what

With the novel coronavirus infecting alarming amounts of people in his state and around the country, California Gov. Gavin Newsom ordered a host of businesses -- including dine-in restaurants and movie theaters -- to close indoor operations. He also ordered all bars in the state to shut down.

Cruise ship stocks dropped on Monday as COVID-19 cases surged in the U.S. and across the world. Image source: Getty Images.

The statewide order is a worrisome escalation of California's previous attempt to close only businesses in designated COVID-19 hotspots.

Now what

The Trump administration has so far rejected calls to slow economic reopening plans in light of soaring COVID-19 case counts. However, investors have wondered whether states and local officials would slow or even reverse their reopening schedules. On Monday, they got their answer.

California may not be the last state to be forced to close businesses due to the pandemic. New COVID-19 case counts are at frightening levels in states such as Florida and Texas. Officials there might enact stricter social distancing measures to stem the spread of the dangerous disease.

None of this bodes well for the cruise industry, which is desperate to resume sailing operations in the fall. If COVID-19 cases keep rising and the number of coronavirus-related deaths keeps increasing, health officials may extend no-sail orders into 2021. That could be devastating for Carnival, Royal Caribbean, and Norwegian Cruise Line, which are all hemorrhaging cash with their ships stuck at port.

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Joe Tenebruso 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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