The travel industry has been ravaged by the coronavirus pandemic, and one of the sectors that have been particularly hurt is the cruise industry. However, the better than expected jobs report from May has fired up the Carnival and other cruise line stocks. Carnival Corp (NYSE:CCL) rallied by as much as 30% over the past week on the back of the jobs report, and it seems that the rally came about in anticipation of a ‘V-shaped’ recovery in the economy.
Hence, if that recovery does transpire, then many businesses that had suffered the most during the pandemic could enjoy a strong rebound.
Carnival is certainly one such business in that regard, and the rally in the stock was understandable. While the rally in the Carnival stock might come as a boost for its investors, it should be noted that this is more of an anticipation rally. Casinos and airlines have already reopened, but cruise ships have not started sailing yet.
Investors are possibly encouraged by the impressive booking data from airlines and think that a similar recovery is going to take place in the cruise business. It should be noted that Morgan Stanley had last week classified stocks of Carnival and its peers Royal Caribbean as well as Norwegian as ‘underweight.’
Jamie Rollo, the analyst at Morgan Stanley, stated that the cruise business is going to return to normal much later than other modes of travel. Considering the fact that Carnival and other companies are not supposed to sail until July, it is perhaps a fair call. Analysts had earlier predicted that it would not be until 2023 or 2024 when the cruise industry went back to normal.
However, if bookings are better than expected for 2021, then that timeline could be accelerated and produce an upside in the stock. The May jobs report could have been a one-off since many companies rehired furloughed workers, and it is hard to say whether the travel industry is going to bounce back as strongly as is being anticipated.