Why Are Cruise Stocks Dropping?

Cruise line stocks are experiencing rapid decline due to weakening economic projections, with all three companies experiencing significant pressure from soaring operating expenses due to rising oil prices. The cruise industry’s outlook for 2024 and 2025 looks bleak, with cruise operators like Carnival and Royal Caribbean feeling the pain of Federal Reserve rate hikes. Carnival shares dropped 0.9% in morning trading but pared earlier losses of up to 3.3%.

Carnival shares fell below their pandemic lows Friday after posting third-quarter earnings that revealed higher costs. Carnival shares are sinking 13% in pre-market today after the company announced a new, $1 billion stock offering. Cruise operators were among the worst performers in the SP 500 SPX, 0.54% to start 2024, after posting record yearly gains in 2023.

Carnival shares are down 12% since that release, while Royal Caribbean shares have fallen 12% since its launch of Icon of the Seas. Inflation is starting to take a toll, with high prices and a downturn in the economy leading to spending fatigue.

Cruise lines are losing some pricing power, with Norwegian Cruise Line Holdings (NCLH) stock falling 15.6% since the beginning of the year and 25.9% below its 52-week high of 22.52. Shares of Royal Caribbean sunk to a one-month low Tuesday morning, dropping more than 5% on the day following a string of troubling events.

Carnival, Royal Caribbean Cruises, and Royal Caribbean Group stocks are all falling as investors price in a series of headwinds for the sector.