Why Carnival, Royal Caribbean, and Norwegian Cruise Line Stocks Are Bouncing Back Today

What happened

Monday was a rough day for investors in cruise stocks. News reports that Carnival Corporation (NYSE: CCL) (NYSE: CUK) subsidiary AIDA Cruises is canceling planned early-August trips due to a lack of preapproval from the Italian government, that the Norwegian cruise ship MS Roald Amundsen is reporting 43 coronavirus infections aboard, and that Norway is restricting cruises for the next 14 days while it investigates the outbreak, reminded investors that all is still not well in the industry. The news sent shares of Carnival -- and Royal Caribbean Cruises (NYSE: RCL) and Norwegian Cruise Line Holdings (NYSE: NCLH), too -- down sharply in response.  

Tuesday is a new day, however, and in early trading, circa 11:35 a.m. EDT, all three of the big cruise line stocks are bouncing back a bit, with Carnival stock up 4.8%, Norwegian Cruise up 4.5%, and Royal Caribbean stock gaining 4%.

And Royal Caribbean may be the reason for it.

A trio of cruise ships lined up in port

Pick a cruise line stock -- any cruise line stock. Image source: Getty Images.

So what

In today's issue of Cruise Industry News, we learn that Royal Caribbean has successfully renegotiated three of its financing agreements, for a total of nearly $4.5 billion, to remove "fixed charge coverage and net debt to capitalization covenants ... through and including the fourth quarter of 2021."

In effect, this means that at the cost of agreeing not to repurchase shares or pay dividends through Q4 2021 (which probably wasn't going to happen in any case), Royal Caribbean has extended the period in which it can operate without fear of being declared in default (and having to repay its loans) through the end of next year -- giving the company additional flexibility as it navigates the effects of the coronavirus.  

Now what

And flexibility is the name of the game here. With U.S.-operated cruise lines largely restricted to port by order of the Centers for Disease Control through Sept. 30, no one's going to be earning any money in this industry for at least another couple of months, and possibly longer than that. For the time being, investors need to focus on just ensuring they're invested in companies that will survive to fight another day.

In that regard, here are the latest tallies, according to data from S&P Global Market Intelligence:

  • Carnival Corporation has $6.9 billion in cash and short-term investments available to it (versus $22.3 billion in total debt).
  • Royal Caribbean has less cash -- but less debt, too -- $3.9 billion of the former and $16.8 billion of the latter.
  • And Norwegian Cruise has $1.4 billion to keep itself afloat, and $8.8 billion in debt weighing it down.

Which cruise line stock do you like best: The one with the most debt and the most cash, the one with the least, or the one lying somewhere in between? You pays your money and you takes your chances.

10 stocks we like better than Carnival
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Carnival wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks


*Stock Advisor returns as of June 2, 2020


Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Carnival. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Latest Markets Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More