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Carnival, Other Cruisers’ Stocks Ain’t Goin’ Nowhere

Shares of major cruise lines jumped on Wednesday on a late report that plans were being developed to get sailing again. Shares of Carnival Corp. & PLC (NYSE: CCL) and Royal Caribbean Cruises Ltd. (NYSE: RCL) traded up nearly 5% in the after-hours session. Norwegian Cruise Line Holdings Ltd. (NASDAQ: NCLH) traded up more than 4%.

By midday Thursday, all had given back at least some of that gain. Cruise lines have been particularly hard hit by the coronavirus pandemic. No new cruises have sailed since mid-March, and thousands of shipboard and on-shore staff have been laid off or furloughed.

On Tuesday, Norwegian and Royal Caribbean announced the creation of a joint safety task force (the Healthy Sail Panel) to develop a set of social distancing measures for cruise ships. The panel plans to use European Union guidelines as a starting point for a planned resumption of sailing.

While the entire cruise industry may not be behind some of the expected guidelines, the pressure is likely to be intense to get stragglers on board so the industry can put to sea again.

In early April, the U.S. Centers for Disease Control and Prevention (CDC) estimated that around 100 cruise ships remained at sea off the U.S. east, west and Gulf Coasts, with nearly 80,000 crew members on board. Of some 48 ships still in U.S. waters earlier this week, 11 had one or more confirmed cases of COVID-19 or illness with similar symptoms within the past 28 days.

According to CDC data, more than 100 ships in U.S. jurisdiction alone had COVID-19 outbreaks, and nearly 3,000 people were struck by the infection. More than 2,100 were crew and more than 850 were passengers. As recently as late June, some 68 ships were still sailing the world’s oceans, with 21,506 crew members on board, in U.S. waters alone.

The CDC also has issued a ban on sailing until at least July 24, or until the COVID-19 outbreak is under control. The industry’s main trade group voluntarily extended the no-sail period from U.S. ports through September 15. Cruises leaving Canadian ports have been canceled until November.

In early June, Morgan Stanley analyst Jaime Rollo downgraded Norwegian to an Underweight (i.e., sell) and reiterated the same rating on both Carnival and Royal Caribbean.

Carnival stock dropped about 2% Thursday, to $15.02 in a 52-week range of $7.80 to $51.94. The consensus 12-month price target on the stock is $16.86.

Royal Caribbean shares tumbled more than 4.5% to trade around $47.78, in a 52-week range of $19.25 to $135.32. The price target on the stock is $65.87.

Norwegian stock traded down about 3.7%, at $15.40 in a 52-week range of $7.03 to $59.78, with a price target of $17.79. After markets closed Wednesday, the company issued a prospectus proposing the sale of 46.6 million shares on behalf of private equity firm L Catterton. The firm purchased $400 million in Norwegian convertible debt in May at $12.10 and now wants to cash out.

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