Why Cruise Line Stocks Are Sailing Higher Tuesday Morning

Tuesday morning brought some hesitation to Wall Street, as market participants got a reminder that geopolitical problems are still extreme and will likely persist for a long time. The U.S. government imposed restrictions that prevented the Russian government from using U.S. bank reserves to pay bondholders, pushing Russia toward what increasingly appears to be an imminent default. That made investors more nervous about whether the war in Ukraine will come to a favorable resolution in the near future. As of 7 a.m. ET, futures on the Dow Jones Industrial Average (^DJI) were down 91 points to 34,738. S&P 500 (^GSPC) futures had dropped 13 points to 4,565, while Nasdaq Composite (^IXIC) futures had lost 46 points to 15,118.

However, an area of the stock market that many investors have stopped paying such close attention to lately managed to show some signs of life. Cruise ship stocks took a huge hit during the first two years of the COVID-19 pandemic, and their recovery has been slow in coming. The latest news from some key players in the industry, however, suggest that consumer demand for cruises is still strong and should help bolster cruise ship operators over time.

Carnival looks to celebrate its 50th birthday

Shares of Carnival (CCL) (CUK) were up almost 4% in premarket trading on Tuesday morning. The company has been looking to celebrate the 50th anniversary of its first cruise throughout 2022, and it found another reason for optimism as it offered its latest look on its current operations.

Carnival revealed that it had its busiest booking week in its history during the period from March 28 to April 3. The cruise ship operator didn’t offer specific numbers, but it did say that the new figure smashed the old record for a seven-day booking total, eclipsing it by a double-digit percentage.

The numbers make sense in light of the efforts that Carnival has made to reopen strong. Currently, Carnival has 22 of its 23 ships back in operation in all the homeports that serve the U.S. market around the year. The final outstanding ship, the Carnival Splendor, will return to Seattle in early May, followed by a new ship, the Carnival Celebration, to the port of Miami.

Carnival is bulking up to meet anticipated high demand. By the end of 2022, it expects to have more sailing capacity than it had before the pandemic in 2019. Yet another ship, the Carnival Jubilee, will hit the seas from Galveston, Texas, during 2023. As Carnival looks forward to Australia reopening to cruises, the company sounds more optimistic than ever about its future.

One of these cruise ship stocks is not like the others

Other cruise ship operators saw their shares rise as well. Both Norwegian Cruise Line Holdings (NCLH) and Royal Caribbean Cruises (RCL) were up between 2% and 3% in premarket trading.

Growing demand has led all three companies to take steps toward returning to pre-pandemic norms. Mandatory mask requirements have given way to optional mask policies, and some of the more lenient flexible cancellation policies instituted during the pandemic have started to revert toward what they looked like in 2019.

Yet there’s one area in which Royal Caribbean stands out: its stock price performance. Look back three years, and Royal Caribbean has still taken a significant hit, falling 28%. However, both Norwegian and Carnival are still down more than 60%, and it’s likely that given the financial maneuvers they’ve had to make to survive, the stocks could continue to lag well into the future.

Cruise stocks will remain volatile with the ups and downs of sentiment toward geopolitics, public health, and economic conditions. However, it looks increasingly likely that cruise fans will soon be able to have an experience very similar to what they had before the pandemic.

Originally published on Fool.com

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Dan Caplinger 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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