Cruise line stocks such as Carnival, Norwegian Cruise Line and Royal Caribbean Cruises rallied as the economy continues to gradually reopen on hopes of recovery in travel demand. On Monday, Carnival Corporation (NYSE: CCL) and Royal Caribbean Cruises Ltd (NYSE: RCL) jumped 6.7% and 7.3%, respectively. But today they are 0.12% and 0.68%. Yesterday Norwegian Cruise Line Holdings Ltd (NYSE: NCLH) gained more than 10% but is 0.087% down today.
So, how can this be possible? We presume that a combination of optimistic news regarding the possible coronavirus vaccine developments in recent days and easing of the lockdown restrictions possibly added on to the gains in cruise ship stock prices.
Royal Caribbean Gradually Back on Track
Royal Caribbean was for sure one of the companies that suffered the most severe consequences. However, if we take a look at its stock movements recently, it looks like investors believe that the recovery might come sooner than they were thinking.
The travel and leisure sectors were among the hardest hit during the March sell-off, and Royal Caribbean was more rule than the exception to that trend.
At its January peak, RCL stock traded above $135. At its March rock bottom, it fell below $20. On May 28, it closed just below $52, meaning shares have nearly tripled in just about two months.
Just for a reminder. At the peak of the panic over the novel coronavirus, everybody went on claiming that “no one” would want to fly for fear of being in a closed space for hours on end while the virus was active. “No one” would want to enter a casino or movie theater and sit inches from other humans.
For sure “nobody” wanted to get on a cruise liner after seeing all those images on the news of ships being held at sea, prevented from coming to port because a crew member or passenger contracted the coronavirus.
Let’s also not forget that after this, it seems that nobody will have the money to go on a vacation, especially to take a cruise. People are trying to hold to their jobs – if they haven’t been fired, salaries are thinner and thinner as are the wallets of people impacted by the coronavirus.
Price action in Royal Caribbean and its rivals suggest that the much-admired V-shaped recovery we hear so much is either already happening or will happen soon.
Moderna Announces Kickoff of Its Phase 2 Vaccine Study
Let’s just hope that the last few days weren’t forgotten by the investors, now monitoring the U.S. protests. Last week, a lot of pharma companies reported heir first results regarding the COVID-19 vaccine.
On Friday, Moderna Inc (NASDAQ: MRNA) announced the kickoff of its phase 2 study for its coronavirus vaccine, mRNA-1273. Moderna’s experimental drug gave optimistic preliminary phase 1 results, released on May 18, and the biotech company has been restructuring its manufacturing capacities so as to be enabled to make large scale quantities of the vaccine if its effectiveness gets to be approved.
On Monday, Eli Lilly and Company (NYSE: LLY) began testing an experimental antibody treatment specifically made to combat SARS-CoV-2, the virus that causes COVID-19. Lilly is developing the medicine, called LY-CoV555, together with privately-held AbCellera Biologics. AbCellera and the National Institute of Allergy and Infectious Diseases (NIAID) discovered the antibody from a blood sample taken from one of the first people who recovered from COVID-19 in the U.S.
Also on Monday, Gilead Sciences Inc (NASDAQ: GILD) reported on results from a phase 3 clinical trial of its COVID-19 treatment, remdesivir. Gilead said the study showed patients who were given a five-day treatment of remdesivir plus the standard of care were 65% “more likely to have clinical improvement at Day 11 compared with those in the standard of care group.” These results are pretty optimistic since they suggest Gilead’s remdesivir could potentially help people with moderate cases of COVID-19 recover faster.
Also, the good news is coming from Russia as well. The country’s sovereign wealth fund has given assets for the development of a COVID-19 treatment based on an influenza drug named favipiravir. First studies allegedly showed that the treatment, called Aviifavir, could shorten recovery times from COVID-19. Russia has reportedly approved the drug to treat COVID-19 and will start shipping it to treatment centers this month.
Cruise Line Stocks Likely to Continue Rising
Carnival, Royal Caribbean, and Norwegian have seen their businesses (together with their stock prices) ruined by COVID-19. As multiple outbreaks aboard cruise ships resulted in more than 3,000 people getting sick and 82 deaths, the Centers for Disease Control put no-sail orders in March and extended them in April. With their ships stuck at port, Carnival, Royal Caribbean, and Norwegian were spending their money for nothing.
All three of the major cruise operators have raised large amounts of capital by taking on additional debt to be able to pay their expenses until coronavirus-related sailing restrictions are lifted. Still, there is a possibility that even after these sailing restrictions are removed, many people still won’t decide to go to a cruise until an effective vaccine or treatment for COVID-19 is discovered.
That’s why the stocks of Carnival, Royal Caribbean, and Norwegian Cruise Line will probably continue to behave according to the race for a coronavirus cure and vaccine.