Why Carnival Corporation, Norwegian Cruise, and MGM Resorts Stocks Dropped Today

What happened

Tuesday trading drew to a close with cruise line stocks Carnival Corporation (NYSE:CCL) and Norwegian Cruise Line Holdings (NYSE:NCLH) down 3.2% and 4.3%, respectively, while another big leisure stock, MGM Resorts (NYSE:MGM), lost 4.3%.

But the funny thing is that there was actually some pretty good news about these travel and leisure names.

Collage showing a cruise ship, a person in a face mask, and a microbe.g.foolcdn.com/image/?url=https%3A//g.foolcdn.com/editorial/images/639701/collage-showing-a-cruise-ship-a-man-in-a-face-mask-and-a-microbe.jpg&w=1000&op=resize 1000w, g.foolcdn.com/image/?url=https%3A//g.foolcdn.com/editorial/images/639701/collage-showing-a-cruise-ship-a-man-in-a-face-mask-and-a-microbe.jpg&w=2000&op=resize 2000w”/>

Image source: Getty Images.

So what

Take MGM, for example. According to a report on TheFly.com, the New Jersey Division of Gaming Enforcement says that gaming revenue in Atlantic City’s home state soared more than 70% year over year in July. That certainly sounds like it should be good news for a casino stock like MGM.

As for Carnival and Norwegian? According to CruiseIndustryNews.com, the global cruise industry is on pace to have nearly half its ships back in the water and cruising by the end of August. Of 410 ships in operation, 190 are scheduled to be sailing regularly again by Aug. 31, or more than triple the 55 ships that were sailing just three months ago at the end of May.

That’s roughly 275,000 paying customers that we can expect to be contributing revenue to companies like Carnival and Norwegian, and that also sounds like pretty good news.

Now what

Except that coronavirus is now threatening to derail the recovery again. According to the latest data from Johns Hopkins University, the U.S. recorded more than 210,000 new cases of coronavirus on Monday alone. There were nearly 670,000 new cases recorded globally.

Commenting on the virus’s resurgence, Norwegian Cruise Line Holdings CEO Frank Del Rio told Yahoo! Finance yesterday, “There is no hiding it. The spread of the Delta variant has got consumer confidence lower.” This is depressing bookings at his cruise line — and presumably, at other cruise lines as well.

The good news is still that eventually, the pandemic will end. Indeed, Del Rio predicts that “the back half of 2022 could be the best back half the company ever had.” It’s just that in the meantime, the delta variant of coronavirus is raging out of control, and that’s probably not going to be good news for travel and leisure stocks in the near term.

This article represents the opinion of the writer, who may disagree with the official recommendation position of a Motley Fool premium advisory service. Were motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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