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Is Royal Caribbean (RCL) Doomed to Have a Terrible 2021 Too?
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The year 2020 has turned out to be a nightmarish one for the cruise industry, and Royal Caribbean Group (RCL - Free Report) has been no exception to the trend. Shares of the company, which touched $135 mark in January 2020, are now hovering around $70.
Year to date, the company’s shares have slumped 46.2%, compared with the industry’s decline of 28.2%. The dismal performance can primarily be attributed to the coronavirus outbreak that has compelled the company to cancel cruises. In fact, other stocks from the same industry including instance Carnival Corporation & Plc (CCL - Free Report) and Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) have also been bearing the brunt of the same.
Let’s Take a Closer Look
The company has suspended all voyages since mid-March. Due to the pandemic, bookings for 2020 have declined significantly. It anticipates to report net loss on both a GAAP and adjusted basis for the fourth quarter and 2020 fiscal year. In fact, the outbreak has persuaded management to suspend 2020 guidance.
In 2018 and 2019, demand for the company’s all brands and itineraries increased sharply. The company commenced 2020 on a strong note. However, demand stared declining in mid-February. Due to the coronavirus pandemic, the company had to cancel sailings. The bookings still remain constrained but is now better than it was in mid-April. Management stated that it continues to witness steady improvement in bookings for 2021 as summer sailing is driving demand. The company further announced that bookings for second half of 2021 are within the historical ranges. Royal Caribbean Group stated that nearly 80% of its bookings of 2021 to date are new and more than 65% of bookings made since early August have been new.
Moreover, the company is also witnessing cash burn on account of cruise suspension. Further, during suspension of its operations, the company estimated cash burn in the range of $250 million to $290 million per month. This includes ongoing ship operating expenses, administrative expenses, debt service, hedging costs and anticipated necessary CapEx.
Can the Stock Stage a Comeback in 2021?
The ongoing pandemic has compelled companies to forget rivalries and come together to counter the scenario. Case in point, Royal Caribbean and Norwegian Cruise have teamed up to develop safety standards. Former Utah Governor Mike Leavitt and former U.S. Food and Drug Administration Commissioner Scott Gottlieb, are serving as co-chairs of a newly formed group of experts called the "Healthy Sail Panel." During the third-quarter 2020 conference call, the company announced that its team along with healthy sale panel have worked to produce a health protocol to resume operations. The panel has made 74 specific recommendations to help reduce any risk out of the coronavirus pandemic.
Moreover, vaccine rollout that has commenced will boost investor sentiment. Per a report, the federal government is planning to distribute 7.9 million doses of the vaccines developed by Pfizer-BioNTech and Moderna, in the week starting Dec 21.
However, the scenario for 2021 is still not encouraging for the Zacks Rank #5 (Strong Sell) company. In the past 60 days, loss estimate for 2021 has widened to $13.68 from $9.48.
Image: Bigstock
Is Royal Caribbean (RCL) Doomed to Have a Terrible 2021 Too?
The year 2020 has turned out to be a nightmarish one for the cruise industry, and Royal Caribbean Group (RCL - Free Report) has been no exception to the trend. Shares of the company, which touched $135 mark in January 2020, are now hovering around $70.
Year to date, the company’s shares have slumped 46.2%, compared with the industry’s decline of 28.2%. The dismal performance can primarily be attributed to the coronavirus outbreak that has compelled the company to cancel cruises. In fact, other stocks from the same industry including instance Carnival Corporation & Plc (CCL - Free Report) and Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) have also been bearing the brunt of the same.
Let’s Take a Closer Look
The company has suspended all voyages since mid-March. Due to the pandemic, bookings for 2020 have declined significantly. It anticipates to report net loss on both a GAAP and adjusted basis for the fourth quarter and 2020 fiscal year. In fact, the outbreak has persuaded management to suspend 2020 guidance.
In 2018 and 2019, demand for the company’s all brands and itineraries increased sharply. The company commenced 2020 on a strong note. However, demand stared declining in mid-February. Due to the coronavirus pandemic, the company had to cancel sailings. The bookings still remain constrained but is now better than it was in mid-April. Management stated that it continues to witness steady improvement in bookings for 2021 as summer sailing is driving demand. The company further announced that bookings for second half of 2021 are within the historical ranges. Royal Caribbean Group stated that nearly 80% of its bookings of 2021 to date are new and more than 65% of bookings made since early August have been new.
Moreover, the company is also witnessing cash burn on account of cruise suspension. Further, during suspension of its operations, the company estimated cash burn in the range of $250 million to $290 million per month. This includes ongoing ship operating expenses, administrative expenses, debt service, hedging costs and anticipated necessary CapEx.
Can the Stock Stage a Comeback in 2021?
The ongoing pandemic has compelled companies to forget rivalries and come together to counter the scenario. Case in point, Royal Caribbean and Norwegian Cruise have teamed up to develop safety standards. Former Utah Governor Mike Leavitt and former U.S. Food and Drug Administration Commissioner Scott Gottlieb, are serving as co-chairs of a newly formed group of experts called the "Healthy Sail Panel." During the third-quarter 2020 conference call, the company announced that its team along with healthy sale panel have worked to produce a health protocol to resume operations. The panel has made 74 specific recommendations to help reduce any risk out of the coronavirus pandemic.
Moreover, vaccine rollout that has commenced will boost investor sentiment. Per a report, the federal government is planning to distribute 7.9 million doses of the vaccines developed by Pfizer-BioNTech and Moderna, in the week starting Dec 21.
However, the scenario for 2021 is still not encouraging for the Zacks Rank #5 (Strong Sell) company. In the past 60 days, loss estimate for 2021 has widened to $13.68 from $9.48.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks Top 10 Stocks for 2021
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