(Bloomberg) -- Cruise stocks fell on Tuesday after analysts at SunTrust Robinson Humphrey and Macquarie said they don’t anticipate a resumption in North American sailings until 2021.
Cruising in “any meaningful way” in North America for the major brands will not resume until at least the second quarter of next year, SunTrust analyst C. Patrick Scholes wrote in a note, citing industry sources. This would be a “material setback” from the expected October starting dates that his contacts were telling him just two months ago, he said.
Meanwhile, the U.S. Centers for Disease Control and Prevention’s current No Sail Order is set to expire July 24, after having been extended for 100 days on April 9. The industry group Cruise Lines International Association, or CLIA, said last month that its “ocean-going cruise line members will voluntarily extend the suspension” of cruise operations from U.S. ports until September 15.
Scholes expects the CDC will again extend its order. The agency has become a “political entity controlled by the executive office,” he said, citing commentary from large travel agencies that he’s spoken to. “The executive office wants to avoid anything that could raise Covid case numbers ahead of the November election.”
Scholes believes another reason the CDC and executive office are not “aggressively pushing” for the major cruise companies to resume voyages is because these operators are not U.S. companies. There is “less sense of urgency to help an industry that is technically not ‘American.”’
These contacts believe the “the absolute best, but not most realistic, scenario” is the CDC approving cruises after the election. Even then, Scholes said it would take a minimum of six weeks for sailings to begin.
“We believe there will be continued investor disappointment as further starting date delays are announced,” Scholes wrote in a note Tuesday. Following the 100% to 130% surge in the cruise operators’ stocks since their March and April lows, the analyst downgraded his ratings on Carnival Corp. to sell from hold, and Royal Caribbean Cruises Ltd. and Norwegian Cruise Line Holdings Ltd. to hold from buy.
Macquarie Research’s Paul Golding sees a similar scenario emerging, telling clients that a return to normal operations is likely to be “pushed out beyond the start” of fiscal 2021, with a resumption of sailings dependent on the spread of Covid-19 infection and the “nearing of a viable vaccine.”
The analyst downgraded Carnival, Royal Caribbean and Norwegian Cruise to neutral from outperform.
The stocks fell on Tuesday, with Carnival down as much as 4.5%, and Norwegian and Royal off by 4.8%.
(Updates to reflect regular session trading in last paragraph)
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