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Why cruise stocks are plunging today

Yahoo Finance Live anchors discuss stock performance for cruise lines.

Video transcript

BRIAN SOZZI: All right, checking in on another trending ticker, shares of Carnival Cruise Lines falling to levels they haven't seen since 1993, down after the company's updated outlook suggests the path to profitability may be more tenuous as the economy weakens. Carnival's 2023 book position are only slightly above 2019 levels, and management now expects a slightly negative fourth quarter EBITDA, or another way of calling that would be operating profits.

Not too surprised here, Brad, just given we have seen increased discounting on cruise lines. We have seen some pullbacks in various trips related to Hurricane Ian. That impacted more on the fourth quarter. But the economy is slowing down. And a lot of these cruises are booked six months to a year in advance. So if you've lost a job now, you're feeling concerned about your outlook, you're probably not spending thousands of dollars today to go book a cruise.

BRAD SMITH: And for the cruise lines themselves, which would be highly kind of hinging on these re-engagement campaigns to really drum up even more fanfare among what is a very loyal consortium of the experience economy in cruisegoers, and I-- you're not going to put me on a cruise. Like, I just can't get into it.

BRIAN SOZZI: No?

BRAD SMITH: No, I'm not-- I don't do the deep sea stuff. But for the cruise line operators, it's been, OK, how do we increase the amounts that people are spending, even when they are on board the ships? And I think within that, you've got this micro economy that also needs to take place within that ship experience so that the cruise liners see higher fares that they're able to charge, even as they are trying to say, all right, yeah, we're charging a higher fare, but we're also going to throw a discount on top of that. So net, net, you'll be fine.

However, they're going to look on the other side to get you to spend more when you're in that experience. And so this kind of has a twofold impact. If you're seeing them have to spend more in the marketing expenses, more money out the door there, and then hoping that a consumer that is saying, all right, yeah, for the entire family to be able to go on this cruise experience, we're going to need the promotion. And also, we're going to need to cut back on our spending while we're on the ship, too.

BRIAN SOZZI: I've got to try to convince you on the cruise. You go in there.

BRAD SMITH: Can't.

BRIAN SOZZI: You drop your bag in the room, Brad. You go to the bar. You lose track of time. You have no life. All you're doing is you're there. You take your drinks, you go to the hot tub. It's great. You can go to a concert at night. Oh, Brad.

BRAD SMITH: No.

BRIAN SOZZI: It's so good.

BRAD SMITH: I need to see land.

BRIAN SOZZI: Would you take a cruise first or get on Amazon Prime first?

BRAD SMITH: Ah. Ooh, that's tough.

BRIAN SOZZI: We'll take that out.

BRAD SMITH: That's tough, yeah.

BRIAN SOZZI: We'll take that the other side of the break.