Cruise Stocks Sink After CDC Lifts Ban, Analyst Says New Guidelines Delay Recovery

On Friday U.S. Centers for Disease Control and Prevention (CDC) lifted a ban on cruise ships, but cruise stocks traded lower on Monday after investors got details on the set of restrictions that the cruise industry will face for the time being.

What Happened? The CDC’s “Framework for Conditional Sailing Order” doesn’t explicitly indicate when passengers will be able to board ships again. However, the first two phases of the cruise industry’s return will involve proving to the CDC that the cruise lines can test their crews and safely adhere to testing, quarantine, isolation and social distancing requirements on voyages without passengers.

On Monday, Bank of America analyst Geoffrey d'Halluin said the new set of restrictions allows the CDC to maintain control of the industry for the time being.

The third phase of the cruise industry’s return involves each ship gaining CDC certification with 60 days notice prior to passenger voyages. The final phase of the recovery involves a phased return to capacity in a way that will mitigate risk to passengers.

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How To Play It: Following the release of the new guidelines, d'Halluin expects a slightly slower recovery for the cruise industry.

“Cruise lines have been hopeful that revenue service could resume in December, and we believe that this new process likely pushes any meaningful return into mid-1Q21,” he wrote in a note.

As for investors, d'Halluin said it's still too early to have much confidence in the major cruise stocks. Here’s a breakdown of Bank of America’s ratings and price targets for each stock:

• Carnival Corp CCL, Neutral rating, $15 target.
• Royal Caribbean Cruises Ltd RCL, Underperform rating, $34 target.
• Norwegian Cruise Line Holdings Ltd NCLH, Neutral rating, $18 target.

Benzinga’s Take: A widely available coronavirus vaccine will likely be a major catalyst for cruise stocks. However, the ultimate fate of the industry will be determined by how long it takes the travel industry to recover and whether or not the pandemic has permanently changed consumer demand.