Royal Caribbean: Inflection Point
- Royal Caribbean has started generating positive cash flows.
- The company has a large debt load, but EPS targets top $5 next year due to strong demand.
- The stock only trades at 11x '23 EPS targets and the cruise line has a path to produce higher earnings.
- This idea was discussed in more depth with members of my private investing community, Out Fox The Street. Learn More »
While Royal Caribbean Cruises (NYSE:RCL) has seen their business hit a major inflection point, the stock trades at the yearly lows. Despite the storm clouds dissipating on Covid fears, the market has now shifted to concerns on a recession in spite of pent-up consumer demand. My investment thesis remains ultra-Bullish on the cruise lines with the disconnect between demand and stock valuations rather large at this point.
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Update - June 24
The negatively on this stock was absurd. Carnival only needed to report a solid backlog to watch these cruise line stocks rebound to May levels.
-Cruise stocks are soaring in Friday midday trading after Carnival Corp.'s (NYSE:CCL) Q2 results showed that it's filling more of its cabins. Occupancy in the quarter rose to 69%, up from 54% in the prior quarter.
-Norwegian Cruise Line (NYSE:NCLH) stock is gaining 11% and Royal Caribbean Cruises (NYSE:RCL) is surging 12%, both stronger moves than Carnival's (CCL) 8.1% increase.
-The significant boost in occupancy came only three days after UBS analyst Robin Farley said investors would "need to see a significant pick up in occupancy from the 50% levels in Q1 (and NCLH even below that) while keeping price above 2019 levels as they have in the quarters since restarting - and for the cruise lines to address some refinancing" before cruise names make much headway.