Cruise ship stocks were among the biggest winners in Friday’s rally. Carnival (CCL) shares were up over 12%. Royal Caribbean (RCL) and Norwegian Cruise (NCLH) shares were both up over 15%.

The jumps came after Carnival forecast a core profit for the current quarter as the cruise operator returns to full operations, even as surging inflation and fuel costs continue to bite into profits. Carnival also said it expects bookings for next year to be at the top end of their historical range, even as prices move higher.

Carnival and the cruise industry were among the hardest hit by the pandemic but are now recovering. Carnival is now operating at 91% of capacity, and booking volumes in the second quarter for future cruises were nearly double those achieved in the first quarter. Occupancy rates were also up to 69% for the period, versus 54% in the previous quarter.

Besides Carnival, Royal Caribbean and Norwegian Cruise Line are also eyeing a near-term return to profitability. So far this year, Carnival shares are down nearly 50%. Royal Caribbean shares are down 48%, and shares of Norwegian are down over 40% year-to-date.

“While bookings and revenue have improved for the cruise lines, the travel and leisure sectors of the stock market vastly underperform the S&P 500 during both bear markets and recessions. Investors may have already decided that this sector is about to experience a serious slowdown in revenue if consumers pull back on discretionary spending,” said Caleb Silver, Editor-in-Chief of Investopedia.

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