Royal Caribbean Cruises Ltd. (RCL) rose 16% last week despite reporting a Q2 2020 loss of $6.13 per-share, much worse than estimates for a $4.15 loss. Revenues plunged 93% year-over-year to a paltry $175.8 million, beating expectations by more than $17 million. The company had little good news during the August 10th release, warning the “magnitude, duration, and speed of COVID-19 remains uncertain” Even so, they noted that 2021 bookings have improved to ‘historical trends’.
Royal Caribbean Cruises Pandemic Headwinds
Cruise ship stocks got crushed in the first quarter after on-board COVID-19 infections forced a number of ships to quarantine passengers at harbors around the world. The industry then shut down with other travel sectors and has failed to reopen, due to continued worries about closed ventilation systems. U.S., Europe, and Australia-based operations have extended shutdowns to October 31st but most aren’t expected to sail again until 2021.
Royal Caribbean Cruises Chairman and CEO Richard D. Fain discussed major headwinds in the release, advising “the COVID-19 pandemic is posing an unprecedented challenge to our industry and society. Our teams are working tirelessly to return to service soonest and doing so by developing new health and safety protocols to protect the well-being of our guests, crew and destinations we visit.” “In the meantime, we are using this time to refine our operations to be as efficient as we can while providing the great experiences that so many people are eagerly awaiting.”
Wall Street And Technical Outlook
Wall Street consensus didn’t budge after the quarterly report, with a ‘Moderate Buy’ rating based upon 7 ‘Buy’, 8 ‘Hold’, and just 2 ‘Sell’ recommendations. The mix looks highly unrealistic, given the possibility that the company will run out of lending facilities and be forced to declare bankruptcy. Price targets currently range from a low of $35 to a street-high $75 while the stock closed Friday’s session about $6 above the median $54 target. This lofty placement suggests it’s more than fully-valued at this time.
Royal Caribbean Cruises faces major technical hurdles despite last week’s rally because it’s still trading well below the 200-day moving average, which was broken on heavy volume in February. The first quarter swoon also broke a three-year topping pattern, establishing heavy resistance in the upper 80s. Buying volume offers the only bright spot in this otherwise bearish scenario, with heavy bottom fishing and short covering lifting accumulation readings near all-time highs.