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Royal Carribbean Appears an Outstanding Long-Term Buy

The company has 1 billion dollar in liquidity, not 300 million.


On Feb 02 09:13 PM PeakOiler wrote:

> Hmmm, $6 billion in debt, $1.37 billion market cap, only $301 million
> in cash. Moody's downgraded the company's debt to almost junk level.
> Dividend has been eliminated. Stock is tanking for all these reasons
> plus the fact the cruise business is in the toilet.
>
> Buy stocks with low or no debt. RCL doesn't come close.

Royal Carribbean Appears an Outstanding Long-Term Buy

I have stocks in this company, but I don't believe in a 700% growth in the share price on a long term.

While the cruise industry is growing, margins have been steadily declining for the past 10 years. The management's guidance was far higher than the actual results this time, and the guidance for 2009 as a whole, are reflecting the current cruise market.

How do you know it won't get any worse?

Secondly there's the issue of debt. The ships are financed, but how will they pay down debt due this year and in 2010? Without a decent stream of cash flow, this stock will get punished hard, and so will the company.

I do believe that if the company manages it debt properly without retorting to issuing stocks, the share price might be 4-5 times higher than current price.