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Wall Street thinks Royal Caribbean will not return to pre-Covid levels until 2024-2026

In:
19Aug2020
By: 
Matt Hochberg

While what is in store for Royal Caribbean's short term and long term future are anyone's guess, Wall Street analysts have no problem weighing on how they see things progressing.

Bears of Wall Street is a group of traders and financial analysts who recently wrote it may not be until 2024-2026 before Royal Caribbean Group can return to 2019 levels of business.

Royal Caribbean Group recently said they have a monthly cash burn of $200-290 million, and the financial group thinks Royal Caribbean has enough liquidity (cash) to deal with a prolonged cruise suspension.  That being said, the road back to recovery is going to be a long one.

Given the financial strains of trying to remain in business, the Bears of Wall Street estimates Royal Caribbean Group will be able to return to pre-COVID levels of business sometime around 2024-2026.

Royal Caribbean Group has $4.15 billion in cash reserves, and its net debt position is $15.46 billion. The good news is that the company faces only $0.3 billion and $1.3 billion in debt maturities in 2020 and 2021, respectively, which gives it enough breathing room not to worry about the liquidity crunch. At the same time, Royal Caribbean says that the company already has $11.3 billion in committed credit facilities to fund its expenses, so liquidity is not going to be a problem.

"We continue to take substantial actions to bolster our financial position," said Jason T. Liberty, executive vice president and CFO. "We have accessed the capital market in an opportunistic manner and continue to aggressively manage our spend. We are prepared to navigate a volatile period while making decisions that position the Company well for the recovery."

In concluding, Bears of Wall Street does not believe in short selling Royal Caribbean's stock for a few reasons:

  1. Royal Caribbean doesn’t have any major debt maturities in the upcoming years.
  2. They have the possibility to raise enough liquidity to stay afloat for a long time.
  3. The Federal Reserve will continue to push the stock market higher.

"For that reason, we have no position in the company and believe that there are better long and short opportunities on the market right now."

Note: Matt Hochberg has no position in any of the stocks mentioned, nor does he own any cruise line stock.