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Investing.com -- Mizuho said concerns over a potential tax increase on cruise lines are overblown and already priced into stocks, calling the recent selloff in Carnival (NYSE:CCL) Corp, Royal Caribbean (NYSE:RCL), and Norwegian Cruise Line (NYSE:NCLH) a buying opportunity.
The brokerage noted that while Commerce Secretary Howard Lutnick suggested in an interview that cruise companies could face higher taxes, history suggests such a change is unlikely. Shares of major cruise lines plunged following this.
A similar proposal in 2017 under former President Donald Trump was ultimately abandoned, and any changes to Section 883 of the IRS code would require congressional approval.
Mizuho estimated that even if a theoretical 20% tax were imposed, it would likely apply only to portions of itineraries touching the U.S., not entire operations.
It calculated that Carnival’s recent 10% stock decline already reflects such a tax scenario, with similar math applying to Royal Caribbean and Norwegian.
The firm also pointed to Carnival’s $26 billion in net operating losses from 2020 to 2023, which could mitigate any tax impact.
Cruise lines are already grappling with rising oil prices, which have climbed 16% from 2024 lows, increasing operational costs.
Despite the sharp decline recently, cruise stocks have surged in recent years, driven by booming post-pandemic travel demand. However, the threat of new taxation could challenge the industry’s recovery, leaving investors cautious about future profitability.
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