Market Commentary

Why Cruise Stocks are Suddenly Falling

Raza Akram
6 Feb 2024 · 1 minute read

Cruise stocks were seen trading sharply lower on Tuesday following concerns raised by Wall Street analysts regarding sustained higher oil prices.

Leisure industry analysts have cautioned that prolonged elevated fuel costs could potentially impact earnings in the wake of recent events, including Hamas's attacks on Israel.

As a result, Carnival (CCL:US) and Royal Caribbean Cruises (RLC:US) lost 4.3% and 2.9% on Tuesday, respectively. Norwegian Cruise Line (NCLH:US) ended the day unchanged.

Wall Street analysts were seen cutting price targets on some cruise stocks, including Royal Caribbean. For instance, Barclays' Brandt Montour, who maintains an "overweight" rating, reduced the price target to $127 from $132. 

Montour estimates that there will be approximately $10 million in additional fuel costs for the third quarter and $20 million for fuel and foreign exchange factors in the fourth quarter. He also notes that while all cruise companies are facing various cost pressures, including fuel costs, Royal Caribbean is relatively better positioned due to its fuel hedging strategies.

The impact of these concerns has led to adjustments in estimates for 2024 adjusted EBITDA and EPS, reflecting the potential challenges that the cruise industry may face due to rising fuel costs and other factors.

Representative Ro Khanna has been trading cruise stocks in recent months. Earlier this year, Rep. Eric Burlison sold $15,000 - $50,000 worth of CCL shares.