Abdelrahman
Shares of cruise companies experienced a significant decline on Thursday following remarks made by Commerce Secretary Howard Lutnick, who indicated that the Trump administration may implement tighter regulations on the taxes these companies owe.
During a late Wednesday appearance on Fox News, Lutnick questioned, “Have you ever spotted a cruise ship featuring an American flag on the back?” He continued, highlighting tax practices, stating, “None of them pay taxes… every supertanker, none pay taxes… all foreign alcohol. This will change under Donald Trump.”
The market responded to these comments, with Carnival’s stock plummeting by 9%, Royal Caribbean experiencing an 11% drop, Norwegian Cruise Line seeing a decline of up to 10%, and Viking Holdings weakened by as much as 7.7%.
Analysts from Stifel Financial characterized the sell-off of cruise industry stocks as an “enormous overreaction” and encouraged investors to capitalize on the current downturn by acquiring shares at lower prices. Analyst Steven Wieczynski pointed out, “This is likely the tenth occasion in the last 15 years that a politician or bureaucrat has discussed modifying the tax structure for the cruise sector. Historically, such talks have not gained traction.”
Stifel further noted, “From a tax perspective, the cruise sector is categorized under the cargo industry by the IRS. This means any major changes would require a complete overhaul of the entire cargo sector, which is far larger than the cruise industry.”
The report also suggested that the cruise industry might consider relocating their corporate headquarters outside the United States, leading to a reduction in domestic jobs. “With over 90% of their operations taking place in international waters, it would become nearly impossible for the U.S. or any other authority to regulate these cruise operators,” it stated.
Stifel holds buy recommendations for six cruise line stocks: Carnival, Royal Caribbean, Norwegian, Viking, alongside Lindblad Expeditions Holdings and OneSpaWorld Holdings.
