With the horrific debacle of the Diamond Princess dominating headlines and cruise ships losing customers and canceling trips due to the coronavirus, its no wonder stocks of those companies have dropped some 20% year to date.
Its certainly not the best of times for the big three publicly traded cruise ship companies: Carnival Cruise Line (CCL)which operates the Diamond PrincessRoyal Caribbean (RCL) and Norwegian Cruise Line (NCLH.) Still, reports of their demise, or even being in dire straits, are exaggerated I think.
To be sure Wall Street hassoured on the stocks. Uncertainty is one of the reasons we downgraded shares of cruise companies, says Tuna Amobi, analyst at CFRA. Norwegian, we have a strong sell. Royal we have a sell. Carnival we have a sell. We think this overhang will dampen investor sentiment.
And yet here is the indefatigable Richard Branson launching a brand new cruise ship line, named predictably, Virgin Voyages, in the teeth of the maelstrom. Bransons first ship, the Scarlet Ladycarrying 2,770 passengers and 1,160 crewwill reflect the usual Virgin hipness and will address some of the sustainability concerns that vex the business. All ships in Bransons planned fleet of four will be carbon neutral and will shun plastic and wasteful buffets.
Does Branson know something Wall Street doesnt? Could be.
Branson believes that the coronavirus, or more precisely COVID-19, is a temporary thing, and is so confident of that, he didnt even delay the launch, which he could have easily done.
Cruising is business with wind at its back, too. Before the coronavirus, some 32 million passengers were expected to set sail in 2020, two times the number of customers in 2009.
I find cruise ships to be super-cool, and I say that having never been on one. (Some day, some day.) Maybe it was watching The Love Boat when I was young, but really its the scale of the ships that I find so appealing. The biggest shipssome 300 of these behemoths sail the seasare over 1,000 feet long and 200 feet wide, weigh over 200,000 tons and carry 6,000 passengers, with the most luxurious having a like number of crew.
The companies are fascinating too. Did you know that both Norwegianwhich isnt really Norwegianand Carnival were founded by the same man, the late Ted Arison? And that Carnival, dually listed on the London Stock Exchange and the NYSE, is the only company included in both the S&P 500 and the FTSE 100? The Arison family has made a fortune from Carnival, the biggest of the three companies with a market cap of some $30 billion. Teds son Mickey, former long-standing CEO of Carnival and owner of the Miami Heat, is worth $7.8 billion, according to Forbes.
Royal Caribbeanwhich really was Norwegian originally but is now based in Miamiis the second biggest company with a market cap of $22 billion. RCL ranks as the stock market star of the group, up 1094% since its IPO in 1993 (and remember thats after being down 20% this year) versus 666% for the S&P over the same period.
Norwegian Cruise Line on the other hand began as a single car-ship ferry between England and Gibraltar in the 1960s and would go on to own iconic ocean liners SS France and SS United States. In 2007, Leon Blacks Apollo Management bought a 50% stake in Norwegian for $1 billion with TPG coming in to take a stake as well. Norwegians stock has trailed the market since its IPO seven years ago.
The cruise ship business is no stranger to disasters both large and small. While nothing approaching the Titanic has occurred recently, there was the sinking of the Costa Concordia (operated by a subsidiary of Carnival) off the Italian coast in 2012, resulting in 32 fatalities. And seven years earlier Somali pirates attacked a small cruise ship, the Seabourn Spirit. They were fended off by the crew, who used a water hose and sonic cannon capable of causing permanent damage to hearing from a distance of more than 300 metres (984ft), but not before the pirates fired automatic weapons and RPGs wounding crew members. And then of course there are the myriad cases of Norovirus, E. coli and Legionnaires' disease that have coursed through these vessels, none though significant enough to hinder the inexorable growth of this business.
Story continues
But COVID-19, and the floating petri dish otherwise known as the Diamond Princess, have been a real threat. (Confusion doesnt help. Like when officials from the CDC were arguing that U.S. citizens from the ship not be flown home while the State Department saying they should.)
I personally think this is a bigger deal to the travel industry than any event since 9/11, says James Hardiman, an analyst at Wedbush. That includes SARS, Ebola, Costa Concordia crash, spates of terrorism and the Arab Spring.
Miembros de la prensa se congregan cerca del barco Diamond Princess en Yokohama, Japn, el martes 11 de febrero de 2020. (AP Foto/Jae C. Hong)
By the way, its not just the Diamond Princess, where 634 of the 3,700 passengers and crew tested positive...so far, that has put the cruise ship business in a bad light. Dont forget the World Dream which was held in Hong Kong for four days when the company learned that three passengers who had sailed on the vessel earlier were confirmed to have the virus. The quarantine was lifted after all 1,800 crew members tested negative. Even worse: The so-called Pariah ship Westerdam, which was denied docking at five ports; in Japan, the Philippines, Taiwan, Thailand, and Guam because of fears of COVID-19. The ship was finally granted entry to Cambodia. None of the 2,000 passengers and crew were found to be infected.
Not surprisingly, the business is hunkering down. Norwegian just announced it was canceling all 40 cruises in Asia this summer. The Wall Street Journal reports that four-day cruises on Carnival ships are available for as little as $139 per person this month. My colleague Alexis Christoforous reports that Norwegian expects the epidemic to hurt full-year adjusted earnings by 75 cents a share and it sees capacity growth of 8.1% for the full year, down from its previous guidance of 8.7%. Royal Caribbean has said the epidemic would shave 65 cents a share off its per-share earnings this year. It has also canceled sailings in southeast Asia and modified itineraries.
Even with all that, at some point these stocks are a Buy, right?
Hardiman notes that if you had bought cruise ship stocks during previous crises you wouldve made money. To some degree, my projection that a year from now stocks would be higher is based on the idea the virus will get contained. It will still be an issue most of this year and to some degree next year, but if I can it see it as an issue start to subside, he says. In others, buying the stocks is a bet on COVID-19 abiding, which it will at some point.
Meanwhile, good news, the Diamond Princess, will be ready to sail in April, after a good cleaning Carnival insists.
Bet you could pick up a ticket on the cheap.
This article was featured in a Saturday edition of the Morning Brief on February 22, 2020. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET.Subscribe
Andy Serwer is editor-in-chief of Yahoo Finance. Follow him on Twitter:@serwer.
Read the latest financial and business news from Yahoo Finance
Read more:
Here is the original post:
What will the coronavirus do to cruise ships - Yahoo Finance
- NBA playoffs: Bucks G Patrick Beverley chucks ball at multiple Pacers fans amid elimination - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- Britney Spears says she feels 'harassed' after paramedics respond to incident at Chateau Marmont: The latest - Yahoo Entertainment - May 3rd, 2024 [May 3rd, 2024]
- How the Knicks' special chemistry helped them turn back the 76ers - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- 11 stocks that mattered most this earnings season - Yahoo Finance - May 3rd, 2024 [May 3rd, 2024]
- Fed holds interest rates at 23-year high, citing 'lack of further progress' on inflation - Yahoo Finance - May 3rd, 2024 [May 3rd, 2024]
- Odell Beckham Jr. reportedly signing 1-year, $8.25 million deal to join Dolphins - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- How to watch the 2024 Kentucky Derby: Post positions, odds, where to stream and more - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- The Buzz: What would a fantasy baseball draft look like today? - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- 2nd Boeing whistleblower found dead. Here's a timeline of the company's mounting problems. - Yahoo! Voices - May 3rd, 2024 [May 3rd, 2024]
- Trump trial live updates: Hope Hicks called to the stand as testimony resumes in hush money case - Yahoo! Voices - May 3rd, 2024 [May 3rd, 2024]
- Brandon Aubrey thinks soccer background will "absolutely" help with new kickoffs - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- Kentucky Derby: Fierceness' odds keep shrinking ahead of the 150th race - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- How to watch the 2024 WNBA preseason tonight: Caitlin Clark's first Indiana Fever game time, channel and more - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- Amazon Web Services CEO: We're on track to hit $100 billion in sales in 2024 - Yahoo Finance - May 3rd, 2024 [May 3rd, 2024]
- NFL Power Rankings, draft edition: Did Patriots fix their offensive issues? - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- Lynch reveals how he engaged Shanahan on 49ers GM job - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- Drake, Adele, and others are following Taylor Swift back onto TikTok after Universal deal - Yahoo Finance - May 3rd, 2024 [May 3rd, 2024]
- Boss Orders Employee 'Be Prepared To Cancel Or Reschedule Your Wedding' After Layoffs, Despite Her Giving A ... - Yahoo Finance - May 3rd, 2024 [May 3rd, 2024]
- May Reliever Rankings - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- Kyle Hendricks pelted by a line drive during Double-A start - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- China publicizes for the first time what it claims is a 2016 agreement with Philippines - Yahoo! Voices - May 3rd, 2024 [May 3rd, 2024]
- What Pearsall believes Green will bring to 49ers defense - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- What to know about Rickwood Field ahead of Giants-Cardinals game - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- Biden says Americans have 'right to protest but not the right to cause chaos' on college campuses after another night of ... - Yahoo! Voices - May 3rd, 2024 [May 3rd, 2024]
- Billam-Smith 'motivated to avenge loss' to Riakporhe - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- Chinese Grand Prix 2024: How to watch tonight's F1 race without cable - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- Was it legal for Kristi Noem to shoot her puppy and what other options did she have? - Yahoo! Voices - May 3rd, 2024 [May 3rd, 2024]
- Apple unveils record $110 billion buyback as results beat low expectations - Yahoo Finance - May 3rd, 2024 [May 3rd, 2024]
- Paramount has spent a decade as the source of buyout rumors. That might finally come to an end. - Yahoo Finance - May 3rd, 2024 [May 3rd, 2024]
- Lynch reveals hilarious truth about transition from player to GM - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- 7 Social Security Shakeups You Need To Be Ready For Heading Into the New Year - Yahoo Finance - December 22nd, 2023 [December 22nd, 2023]
- Crypto had a surprisingly great year. It still faces threats in 2024. - Yahoo Finance - December 22nd, 2023 [December 22nd, 2023]
- 'How the hell does that even happen?' McCarthy exits Congress amid confusion over who can run to replace him - Yahoo News - December 22nd, 2023 [December 22nd, 2023]
- Short sellers lost close to $178 billion in 2023 - Yahoo Finance - December 22nd, 2023 [December 22nd, 2023]
- Trump legal news brief: Giuliani files for bankruptcy after judge rules he must immediately pay $148 million for election ... - Yahoo News - December 22nd, 2023 [December 22nd, 2023]
- No One Wants Used EVs, Making New Ones a Tougher Sell Too - Yahoo Finance - December 22nd, 2023 [December 22nd, 2023]
- Israel's military campaign in Gaza seen as among the most destructive in recent history, experts say - Yahoo News - December 22nd, 2023 [December 22nd, 2023]
- Barbara Corcoran Says Housing Prices 'Are Going To Go Through the Roof' But When? - Yahoo Finance - December 22nd, 2023 [December 22nd, 2023]
- Are You Wealthy? The Net Worth You Need To Be Considered Poor, Middle-Class And Wealthy In America - Yahoo Finance - December 22nd, 2023 [December 22nd, 2023]
- German bishop Btzing criticizes pope over Ukraine and Israel stance - Yahoo News - December 22nd, 2023 [December 22nd, 2023]
- 'Severe revenue decline': California faces a record $68 billion deficit here's what is eating away at the Golden State's ... - Yahoo Finance - December 22nd, 2023 [December 22nd, 2023]
- Poll: Trump is tied with Biden for now but criminal trials and unpopular plans pose risks for 2024 - Yahoo News - December 22nd, 2023 [December 22nd, 2023]
- Rudy Giuliani files for bankruptcy days after being ordered to pay $148 million in defamation case - Yahoo News - December 22nd, 2023 [December 22nd, 2023]
- 'It's just bragging rights': Once you achieve this credit score there's 'no benefit' to scoring higher, expert says here are ... - Yahoo Finance - December 22nd, 2023 [December 22nd, 2023]
- Records released by House Republicans show that Joe Biden repeatedly emailed Hunter Biden's business associate ... - Yahoo News - December 22nd, 2023 [December 22nd, 2023]
- Tesla Getting Trounced by S&P 500 Three Years After Joining - Yahoo Finance - December 22nd, 2023 [December 22nd, 2023]
- Ukrainian forces shoot down three Russian Su-34 fighter jets on southern front - Yahoo News - December 22nd, 2023 [December 22nd, 2023]
- The only AI 'regulation' coming is from workers - Yahoo Finance - December 22nd, 2023 [December 22nd, 2023]
- Innocent Black Man Spent 50 Years in Prison, His Compensation Will Annoy The Hell out of You - Yahoo News - December 22nd, 2023 [December 22nd, 2023]
- Texas begins flying migrants from southern border to Chicago. The 1st plane carried over 120 people - Yahoo News - December 22nd, 2023 [December 22nd, 2023]
- Donald Trump Is Running Scared - Yahoo News - December 22nd, 2023 [December 22nd, 2023]
- The biggest 2024 threat to Big Tech is coming from both sides of the Atlantic - Yahoo Finance - December 22nd, 2023 [December 22nd, 2023]
- Apple halts online sales of its Apple Watch Series 9 and Apple Watch Ultra 2 - Yahoo Finance - December 22nd, 2023 [December 22nd, 2023]
- 2023 FIBA World Cup: Jaren Jackson Jr.'s elite rim protection and defensive presence come with a price - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- Fantasy Football Rankings: These are the hardest players to ... - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- Cowboys QB Dak Prescott feels for Will Grier after Trey Lance deal, not worried about future in Dallas - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- Massive alligator captured in Mississippi is a new state record. Nightmare material - Yahoo! Voices - August 28th, 2023 [August 28th, 2023]
- Virginia Gov. Youngkin eyes a 15-week abortion ban as a 'consensus' voters would back - Yahoo News - August 28th, 2023 [August 28th, 2023]
- Poll: Trump could be in big trouble for 2024 if convicted of crimes - Yahoo News - August 28th, 2023 [August 28th, 2023]
- 'She-Hulk' star Tatiana Maslany nearly brought to tears after overcoming fears of heights and cold with the help of Bear Grylls - Yahoo Entertainment - August 28th, 2023 [August 28th, 2023]
- Don't feel guilty about being lazy. Experts say there are some health benefits. - Yahoo Life - August 28th, 2023 [August 28th, 2023]
- Center Paolo Banchero helps Team USA power past physical New Zealand in FIBA World Cup - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- Tyreek Hill says Tua's response to ESPN criticism 'fires me up,' shows Dolphins something they've never seen - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- USA's Katie Moon, Australia's Nina Kennedy agree to share pole vault gold after tie atop World Athletics Championships - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- Blue Jays' Bo Bichette, Matt Chapman leave game vs. Guardians with injuries - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- Benches clear twice as Rays roll past Yankees 7-4: 'It's a last-place team' - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- All-Pro Chris Jones says hes willing to extend Chiefs holdout through Week 8 - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- Fyre Festival II: Andy King confirms he's working with Billy McFarland for 'redemption'; 1st drop sells out - Yahoo Entertainment - August 28th, 2023 [August 28th, 2023]
- Pirates first overall pick Paul Skenes doesn't make it out of 1st inning in Double-A debut - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- U.S. men and women sweep gold in 4x100m relay at World Championships - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- Spain soccer president Luis Rubiales apologizes for kissing player, as calls for his resignation mount - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- COVID cases are rising. What are schools doing about it? - Yahoo Life - August 28th, 2023 [August 28th, 2023]
- Nicolas Batum ashamed and scared to go home after France is knocked out of FIBA World Cup - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- Tour Championship: How much did Viktor Hovland, others earn at East Lake? - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- The Daily Sweat: Cubs get chance to cut into streaking Brewers' NL Central lead - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- NASCAR: Chris Buescher wins at Daytona after Ryan Preece's car flips at least 10 times in terrifying crash - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- With college sports more in flux than ever before, new players association group emerges - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- NFL Hall of Fame Game: How to watch the 2023 NFL preseason opener - Yahoo Sports - July 31st, 2023 [July 31st, 2023]
- 2023 NFL preseason: How to watch, full schedule, streaming info and more - Yahoo Sports - July 31st, 2023 [July 31st, 2023]
- Reports: Colts considering placing Jonathan Taylor on NFI list, which could negate his 2023 salary - Yahoo Sports - July 31st, 2023 [July 31st, 2023]