Cruise line stocks have copped a hammering from the coronavirus crisis so far this year, with the group trading down about 60% compared to a decline of just 3% for the broad-based S&P 500. From high-profile outbreaks of the disease, litigation alleging negligence, and canceled sailings, the embattled industry has endured months of unfavorable headlines.
Investors were bracing for another wave of selling Tuesday after Carnival Corporation & Plc (CCL) announced that it had canceled all cruises through Sept. 30, beyond the suspension agreed upon last week by rival cruise operators Royal Caribbean Cruises Ltd. (RCL) and Norwegian Cruise Line Holdings Ltd. (NCLH).
However, cruise line stocks moved higher yesterday, indicating that many of the challenges facing the industry have already been baked in the cake. Below, we take a closer look at the three largest publicly listed cruise line operators and discuss possible trading tactics.
Carnival Corporation & Plc (CCL)
With a market value of more than $14 billion, Carnival is a global cruise company that operates voyages to around 700 ports under brands such as Carnival Cruise Lines, Holland America, and Princess Cruises. The Miami-based leisure travel company, which reported a $4.4 billion second quarter loss due to pandemic cancellations, has vowed to step up its ship-cleaning procedures when it resumes operations. Although Carnival stock has shed 63.6% on the year, it has recovered 50% in the past three months as of June 24, 2020. The company suspended its dividend and share buyback program in March to preserve liquidity.
The cruise line operator's share price broke above a three-month ascending triangle in early June on increasing volume. More recently, the stock has retraced to the pattern's top trendline that now provides a crucial support level. Those who buy here should look for a test of $30, where the shares may encounter resistance from a late February countertrend bounce and the downward sloping 200-day simple moving average (SMA). Protect downside by placing a stop under either the June 22 low or beneath the 50-day SMA, depending on risk tolerance.
Royal Caribbean Cruises Ltd. (RCL)
Royal Caribbean Cruises operates as a cruise company with more than 60 ships in its fleet. The $11.38 billion leisure firm behind brands Royal Caribbean International and Silversea Cruises swung a first quarter loss of $1.4 billion and withdrew second quarter guidance amid ongoing uncertainty. To instill customer confidence, the company has launched a "Healthy Return to Service" program that intends to upgrade screening before boarding, improve onboard procedures, and review destinations visited. Trading at $54.36, the stock has soared 92.83% over the past three months, outpacing the travel services industry average over the same period by nearly 45% as of June 24, 2020. However, the shares are still trading almost 60% lower year to date.
Royal Caribbean shares have eased lower over the past two weeks after reaching a two-month high in early June. Buyers returned to the stock Tuesday, defending the $50 area, where price finds support near the breakout point of an ascending triangle that has been in play since the mid-March bottom. Traders who take a long position should consider booking profits in a zone of resistance between $80 and $100 and setting a stop-loss order beneath the triangle pattern's lower trendline.
Norwegian Cruise Line Holdings Ltd. (NCLH)
Norwegian Cruise Line Holdings offers freestyle and luxury cruising through three brands: Norwegian, Oceania, and Regent Seven Seas. The Miami-based cruise operator, which suffered a massive first quarter loss of nearly $2 billion, raised more than $2 billion in a mix of stock and debt last month to survive the coronavirus pandemic. The capital injection provides $3.5 billion in liquidity, which the company says gives it enough cash to weather "well over 12 months of voyage suspensions in a potential downside scenario," per CNBC. As of June 24, 2020, Norwegian Cruise shares are trading 69.13% lower on the year but have recovered 86% since late March.
The cruise liner's stock – a Robinhood top 100 constituent – has trended higher on increasing volume since sinking to its all-time low in March. Although the shares have succumbed to profit-taking in recent trading sessions, the price remains well bid at the $18 level, where a trendline connecting the March and May swing highs provides support roughly in line with the 50% Fibonacci retracement level. In terms of trade management, consider using the 50-day and 200-day SMAs as respective stop-loss and profit target areas.