Why Cruise Line Stocks Were Sinking This Week

What happened

One of the industries that was hit the hardest by the coronavirus pandemic was a real downer this week too. Following a dark analyst note regarding Carnival (NYSE: CCL)(NYSE: CUK) in particular, all three of the major cruise industry stocks have been hammered over the past few trading days.

S&P Global Market Intelligence data reveals that Carnival, Norwegian Cruise Line Holdings (NYSE: NCLH), and Royal Caribbean Cruises (NYSE: RCL) had all declined by double-digit percentages week to date before the opening bell Friday.

So what

Although it wasn’t the only catalyst contributing to cruise stocks’ plunge, a new analysis from investment bank Morgan Stanley laid out a grim scenario for Carnival. Analyst Jamie Rollo made fairly deep cuts to his revenue forecast for the second half of this year, and to his price target on the stock.

Of greater concern was Rollo’s new worst-case scenario, in which he speculated that if a new shock to cruise demand — like the onset of the pandemic — occurs in the coming months, the value of Carnival stock could plunge to $0.

Now what

Since the key factors behind the analyst’s very bearish take on Carnival apply to the company’s peers, Norwegian and Royal Caribbean stocks plunged as well.

Compounding that for Norwegian, two investment banks published fresh research notes on the cruise operator. Barclays initiated coverage on it with an equal-weight (i.e., neutral) recommendation, while Citigroup lowered its price target on the stock to $13 per share from the previous $18 while maintaining its neutral rating.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Barclays and Carnival. The Motley Fool has a disclosure policy.

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