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Will Royal Caribbean Recover Further In 2021

May 03, 2021 12:24 PM ETRoyal Caribbean Cruises Ltd. (RCL)14 Comments
Fishtown Capital profile picture
Fishtown Capital


  • Investors should focus on Royal Caribbean's Enterprise Value instead of its share price. By this measure, the company is already back to pre-COVID levels.
  • I expect the recovery in cruising to be slow after an initial burst fueled by pent-up demand from frequent cruisers.
  • Operational cash burn was $900 million in Q1. A similar level is expected in Q2, and they will almost certainly burn cash for the rest of the year.
  • April featured significant insider selling at prices between $88-91.
Royal Caribbean, Oasis of the Seas Cruise Ship.
Photo by RobertsGalleries/iStock Editorial via Getty Images

Royal Caribbean (NYSE:RCL) has seen a tremendous recovery, more than tripling off the lows set last March and April. But by now, I think the recovery trade is overdone and shares are set to languish in the foreseeable future.


This article was written by

Fishtown Capital profile picture
Individual investor and family office principal with over 20 years of investment experience. I favor fundamental analysis and look for individual issues and asset classes that are out of favor and represent a good risk/reward trade off. I often employ options strategies, covered calls on companies I own that have gotten ahead of themselves, and writing puts on stocks that I'd like to own at lower prices.Educational background Finance MBA (NYU Stern) with Computer Science undergraduate.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a short position in RCL over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I would consider shorting RCL if the price rose into the mid $90's.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (14)

Siyu LI profile picture
The contrast between the amount of optimism built in this stock vs the amount of uncertainty/challenges just floors me, honestly, for quite a while already.

If we take cash burnt over the last 12M into consideration, its current price is only 10-15% off the ATH.
Fishtown Capital profile picture
@Siyu LI I think many of the new retail traders are just buying “whatever is still down” without regard for much of anything else.

Yeah, the valuation is crazy especially because they’re going to burn another 2-3 billion by year end in cash - and the ships aren’t getting newer sitting in port.
Siyu LI profile picture
@Fishtown Capital we will hear 'let us see who is going to laugh to the bank' soon
Fishtown Capital profile picture
@Siyu LI I think when we get to the point where the cruises lines have been "reopen" for 6 months but results are terrible is when you'll see the selling. For now, hopes and dreams.
Grazi57 profile picture
But I averaged in at $28... and I plan on sitting for a long time.
soral a raison profile picture
Republicans say: I will never conform to mask and vaccination mandates

Democrats say: I will never risk being contaminated on a ship with no way out.

Cruise lines say: We will operate at half-capacity to guarantee social distantiation and we will hire extra staff and incur every expense to insure your safety.

Idiots say: INVEST!!
Fishtown Capital profile picture
@soral a raison I could maybe see the argument to invest if the cruise lines weren't already back to/past their pre-crisis peaks when measured by EV.

I'm not a frequent cruiser, but I've been only a half dozen of them and enjoyed them. But look at this list of restrictions: www.carnivalcorp.com/...

No thank you.
soral a raison profile picture
@Fishtown Capital Cool, an author reply!! Ive been on one cruise myself, did not enjoy it that much, but who cares? More importantly, I belong to one of the groups I named (wont say which one, but you know, the one that tends to get censored a lot by the open-minded free thinkers...).

Anyway, thanks for the link. You should have included it in the article. It is the kind of constraints I would expect to subject myself to as a bio-hazard plant employee, but not exactly as a merry traveller. I counted Carnival has eight priorities, which is at least four too many. Still, not one of them concerns the enjoyment of its guests.
But hey, Im sure the aluminum and the iron alone on those ships should fetch top dollar at the junk yard.
@Fishtown Capital
I don’t understand why they can’t do something like this mobile.twitter.com/...
So that they don’t have to have all the stupid restrictions in place on the ship?
“May initiate a short position...”
Fishtown Capital profile picture
@r87201 Feel free to respond to something factual in the article.
applyberry profile picture
Don’t forget the many country’s which are popular cruise destinations will not let cruise ships tender so this will be a problem for a long time as well as the employees who come from many countries will be hard to call back as a lot have moved on not to mention the cruisers who are on board probably paid low prices to be enticed to cruise. No good news here and little hope of survival in my opinion
Fishtown Capital profile picture
@applyberry They have a lot of challenges in the near future.. I think the current price here is hopelessly overoptimistic.

Survival looks better the more stock they can sell here..
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