Cruise Stocks Drop Amid U.S. Tax Crackdown Concerns: What's Going On?

Cruise stocks such as Carnival Corporation CCL, Royal Caribbean Inc. RCL and Norwegian Cruise Line NCLH are trading lower on Thursday.

Commerce Secretary Howard Lutnick suggested in an interview that the companies will have to start paying U.S. taxes.

What To Know: Lutnick’s remarks, made in an interview on Fox News, centered on the fact that many cruise ships are not paying U.S. taxes despite operating in U.S. waters. He pointed out that the cruise industry is exempt from paying taxes on foreign operations, including the sale of alcohol on board, and warned that this situation could change under the Trump administration.

Despite the decline in share prices, analysts at Stifel Financial have described the market reaction as an overreaction. They highlighted that similar concerns have been raised multiple times in the past without leading to any significant policy changes.

The cruise industry has long been classified under the cargo industry by the IRS, making any changes to the tax structure difficult to implement. Furthermore, analysts suggested that the cruise industry could move its corporate headquarters abroad to avoid potential tax implications.

While concerns about potential tax changes continue to affect the cruise stock sector, analysts are advising investors to view the current slump as an opportunity to buy into companies like Carnival, Royal Caribbean, and Norwegian. The cruise industry remains highly resilient and its tax structure remains largely unaffected by past political discussions on the matter.

Price Action: At the time of writing, Benzinga Pro shows:

• Carnival were down 5.85% at $24.56
• Royal Caribbean Cruise were down 7.62% at $243.89, and
• Norwegian Cruise Line Holdings were down 4.89% at $25.68.

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Image via Norwegian Cruise Line.