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RCL stock down almost 20% this year


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I noticed this being discussed on a FB group I am a part of and was surprised and decided to check it out for myself as I was curious why this hasn't come up. 20% is a significant amount to lose in a company's stock value in 6mths(22% since Jan 29th) and it has wiped out ALL its gains since April of 2017! I am no market whiz but I follow enough to know the basics.

 

Wondering if anyone knows or has heard what the reason or explanation is for this?  Seems anything I heard from Royal or news releases is always rosy when it comes to Royal, but as an investor or a shareholder or a CEO I would think this kinda fluctuation would be cause for some concern.  Especially seeing as how positive the markets and the economy have been recently?!

 

Thoughts?!

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Stock valuation is a fickle beast and variations beyond the control of the senior executives likely keep them all up at night.

One quick analysis is to compare trends against the competition.  This comparative trending can illustrate external forces impacting the whole industry.

That being said let's see how the big three are doing over 12 months:

684766488_RCLstock.jpeg.8fd2427630cf28939705d071c58cf12f.jpeg

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It appears all three peaked in February and have trended lower since.  It appears they all track each other to some degree.  This suggests to me that the emotions, whims and predictions of the markets are the primary factors driving stock valuations for the industry as a whole.  They are all being painted with the same brush. 

One opinion here:

https://seekingalpha.com/news/3361660-cruise-line-stocks-lower-morgan-stanley-warning

Carnival (NYSE:CCL) and Royal Caribbean (NYSE:RCL) trade lower in early action after Morgan Stanley warns on overcapacity in the sector and foresees a potential slowdown in the second half of the year related to hurricanes.

The investment firm also points to the negative macro mix of higher oil prices and a strong U.S. dollar as potential margin pinchers.

CCL -4.29% premarket to $60.62. RCL -2.51% to $103.84.

Last year was a bad hurricane season.  That has likely caused some jitters and has the markets being sensitive to the potential for a repeat while at the same time oil prices have caused equal concerns for airlines as it has for cruise lines.

Stock markets are very speculative so it seems that is the primary factor driving stock prices - speculation.

 

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I don't think this has much to do with Royal Caribbean's operations. The largest single day stock market dip in history happened in February. The January 29th date you mentioned was about a week before the dip so it's not the best point of reference. I can confirm because my 401k has taken a beating so far this year. I'm also no expert when it comes to the stock market, so this should not be construed as investment advice. haha

 

Also, as @twangster referenced it appears that the industry as a whole is not doing well in terms of stock value. This article cites rising fuel prices, travel demand, and flat prices as concerns.

https://www.cnbc.com/2018/06/05/cruise-ship-stocks-are-the-worst-performers-in-sp-500.html

 

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1 hour ago, monctonguy said:

I noticed this being discussed on a FB group I am a part of and was surprised and decided to check it out for myself as I was curious why this hasn't come up. 20% is a significant amount to lose in a company's stock value in 6mths(22% since Jan 29th) and it has wiped out ALL its gains since April of 2017! I am no market whiz but I follow enough to know the basics.

 

Wondering if anyone knows or has heard what the reason or explanation is for this?  Seems anything I heard from Royal or news releases is always rosy when it comes to Royal, but as an investor or a shareholder or a CEO I would think this kinda fluctuation would be cause for some concern.  Especially seeing as how positive the markets and the economy have been recently?!

 

Thoughts?!

pardon me if this is my ignorance but royal has been laying out huge almost science fiction amounts of money on refits piers amusement parks not to mention the symphony does not this huge outlay affect the stock prices until it shows profitably

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5 minutes ago, henrysea13 said:

pardon me if this is my ignorance but royal has been laying out huge almost science fiction amounts of money on refits piers amusement parks not to mention the symphony does not this huge outlay affect the stock prices until it shows profitably

Good point. I guess cruise prices will start going up even more at this point especially since fuel/oil prices are rising.

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The money going towards upgrades should not be negatively affecting the stock price unless they are taking on large amounts of debt to finance them and/or investors feel that the upgrades are losing propositions.  I don't think either is the situation, I believe (without looking at their finances) they are paying for these upgrades mostly through money they have and I think these upgrades are positive improvements to investors.  I think this is related to an overall market adjustment for cruise lines, as @twangster showed with CCL and NCL.  Rather, I would say if someone were looking to invest in a cruise line RCCL might be one worth further study right now with the Perfect Day project looking to (theoretically) increase revenue over the next few years.

Please keep in mind I am not at this time an investment advisor and am not offering investment advice.  This is my standard CYA statement when I talk about money.

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1 hour ago, mworkman said:

As @twangster mentioned, it is best to look at the sector as a whole and see if RC is different than the sector.  To me it doesn't seem any different than the sector.

What you pointed out, Jan 29th was a market high. Just about everything is down compared to that high. Look at the S&P or the Dow.

Fuel/oil is affecting many things, not just cruise lines.  Look at airline stocks which have very similar charts to the cruise lines.   Now, if you look at oil companies (which will go up with the higher oil prices), while they are on an uptrend even they haven't surpassed that Jan 29th high.  I think oil is going to be the biggest factor in stock prices for a while.  When oil is high, certain sectors are significantly lower as their operating costs are go up.  

Bottom line, IMO nothing is specific to what RC is or isn't doing.

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35 minutes ago, henrysea13 said:

pardon me if this is my ignorance but royal has been laying out huge almost science fiction amounts of money on refits piers amusement parks not to mention the symphony does not this huge outlay affect the stock prices until it shows profitably

Investments into items that will generate future revenue are generally a good thing when done responsibly and with the appropriate business analysis.    Perfect Day at CocoCay is a relatively small investment compared to the numbers involved with adding Harmony, Symphony or Spectrum into the fleet. 

All three companies are adding new ships and the notation about overcapacity is playing into the valuation. 

You can't just keep adding ships forever. At some point port capacity and ability to optimize loads will limit revenue potential.  That is what the analysts are cautioning investors about - overcapacity. 

RCL is shifting some capacity into Asia rather than putting a ship like Spectrum into the nearly saturated US market.  The potential to move an Oasis class ship into Galveston if the locals can upgrade and add a terminal to accommodate it may help move some capacity around the US.  It will be interesting to see how Ovation plays out in Alaska - that's a shift in capacity right there.

Putting ships like Mariner, Navigator and Indy into the short FL cruise market even if each is briefly there is another example of shifting capacity.  Perfect Day plays into that, potentially complimenting or even being a prerequisite to support those bigger ships in that short cruise segment.    That potentially makes the Perfect Day investment justified and viewed in a positive way.

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40 minutes ago, cruiselife said:

I don't think this has much to do with Royal Caribbean's operations. The largest single day stock market dip in history happened in February. The January 29th date you mentioned was about a week before the dip so it's not the best point of reference. I can confirm because my 401k has taken a beating so far this year. I'm also no expert when it comes to the stock market, so this should not be construed as investment advice. haha

 

Also, as @twangster referenced it appears that the industry as a whole is not doing well in terms of stock value. This article cites rising fuel prices, travel demand, and flat prices as concerns.

https://www.cnbc.com/2018/06/05/cruise-ship-stocks-are-the-worst-performers-in-sp-500.html

 

Other point of reference was April 2017....so that's a 14mth period...not a random date....and they lost ALL their gains since then..so I am not basing it on a fickle date...14mths is defn more than just a blip...

 

Its interesting..if its happening across all the industry..I would be somewhat concerned about the situation......

 

Doesn't affect me personally...but if my business or company was in the same situation..I would be somewhat concerned.

 

 

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33 minutes ago, monctonguy said:

Other point of reference was April 2017....so that's a 14mth period...not a random date....and they lost ALL their gains since then..so I am not basing it on a fickle date...14mths is defn more than just a blip...

 

Its interesting..if its happening across all the industry..I would be somewhat concerned about the situation......

The charts @twangster provided were all for a 1-year time span going back to last June. So it doesn't quite hit the 14-month span you cited, but clearly does show the pattern affecting the industry as a whole. Stock prices were going up from last June until just before February, and have been declining since. Does line up with the rises in fuel prices, initial threats of trade wars and accompanying market jitters, etc.

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Just waiting and hoping for price decreases to come....they cant sustain this mad pace of adding inventory...eventually it has to come back to bite them at some point...the honeymoom period of all the new ships and bells and whistles will wear off once peoples bank accounts take the hit from all the extras that Royal is throwing out there.

 

But regardless....its not a good situation when you lose all your market gains from the past year(I went back and looked from April 2017, not twangsters chart)

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Carnival's stock has taken a hit, too, and I suspect the airlines will, too, if they haven't already. With rising fuel prices, the profit margin gets squeezed.

The real question is if or when will the fuel supplement be reinstated? I've just checked all of my current cruise invoices on Holland America, Celebrity, Princess, and Royal Caribbean through 2020 and don't see the old "reserve the right" disclaimer for the fuel surcharge, but I wouldn't be surprised if it gets added once again for future bookings.

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On 6/8/2018 at 12:58 PM, DocLC said:

The real question is if or when will the fuel supplement be reinstated? I've just checked all of my current cruise invoices on Holland America, Celebrity, Princess, and Royal Caribbean through 2020 and don't see the old "reserve the right" disclaimer for the fuel surcharge, but I wouldn't be surprised if it gets added once again for future bookings.

Check the cruise contracts, I'd be surprised if the 'reserve the right' clause for the fuel surcharge was 100% gone.  Each line's policy varies, but RCI & X say they reserve the right to re institute the charge if west texas intermediate crude stays above $65 (it's around $66.25 right now).  It's peaked over $100 in recent years and they haven't charged the fee, so I wouldn't worry about it coming back just yet.  They can shuffle some paper around their balance sheet and play with futures contracts to keep a short-term fuel price spike from affecting them too much.  It has to be a sustained long term price increase to really hit them.

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2 minutes ago, Orange Crush said:

Check the cruise contracts, I'd be surprised if the 'reserve the right' clause for the fuel surcharge was 100% gone.  Each line's policy varies, but RCI & X say they reserve the right to re institute the charge if west texas intermediate crude stays above $65 (it's around $66.25 right now).  It's peaked over $100 in recent years and they haven't charged the fee, so I wouldn't worry about it coming back just yet.  They can shuffle some paper around their balance sheet and play with futures contracts to keep a short-term fuel price spike from affecting them too much.  It has to be a sustained long term price increase to really hit them.

@monorailmedic wrote about this on cruisehabit just the other day.

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15 minutes ago, Orange Crush said:

Check the cruise contracts, I'd be surprised if the 'reserve the right' clause for the fuel surcharge was 100% gone.  Each line's policy varies, but RCI & X say they reserve the right to re institute the charge if west texas intermediate crude stays above $65 (it's around $66.25 right now).  It's peaked over $100 in recent years and they haven't charged the fee, so I wouldn't worry about it coming back just yet.  They can shuffle some paper around their balance sheet and play with futures contracts to keep a short-term fuel price spike from affecting them too much.  It has to be a sustained long term price increase to really hit them.

That's possible, but it used to be on the invoice itself as you don't agree to the cruise contract until after final payment.

I only have one cruise that I have an active/approved cruise contract for--Holland America--and the only fuel surchage mentioned is for airlines.

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3 minutes ago, DocLC said:

That's possible, but it used to be on the invoice itself as you don't agree to the cruise contract until after final payment.

I only have one cruise that I have an active/approved cruise contract for--Holland America--and the only fuel surchage mentioned is for airlines.

You might be right, there's no mention of a fuel surcharge in the contract posted on HAL's website aside from reserving the right to pass an airline fuel charge on to you if you booked airfare through them.  But like I mentioned, the cruise lines trade fuel contracts on the commodities markets so they can basically buy up a lot of fuel when prices are cheap and not be affected by a short-lived price jump at all.  If fuel prices stay high, they'll have to re-evaluate whether they can slip it into the base fare or go with the line-item surcharge, but none of them want to be the first one to re-institute fuel surcharges.  They are very unpopular, and there's a reason it hasn't been done in 10 years or so, despite several significant jumps in oil prices.

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2 hours ago, Orange Crush said:

You might be right, there's no mention of a fuel surcharge in the contract posted on HAL's website aside from reserving the right to pass an airline fuel charge on to you if you booked airfare through them.  But like I mentioned, the cruise lines trade fuel contracts on the commodities markets so they can basically buy up a lot of fuel when prices are cheap and not be affected by a short-lived price jump at all.  If fuel prices stay high, they'll have to re-evaluate whether they can slip it into the base fare or go with the line-item surcharge, but none of them want to be the first one to re-institute fuel surcharges.  They are very unpopular, and there's a reason it hasn't been done in 10 years or so, despite several significant jumps in oil prices.

The airlines don't seem to be having a problem with surcharges for luggage and the like as it makes the airfare look cheaper in the beginning. ? This is also how the budget carriers operate.

Once one reinstates the fuel surcharge, they'll all do it just like with room service charges, upping of gratuities, etc. But I also agree that they're going to be conservative as bookings have been good and they don't want to jeopardize that momentum.

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  • 2 weeks later...

Some good information here. I would have to agree that since all of the big cruise lines are moving similar that it’s more a speculative move rather than anything Royal specific. Fear is one of the biggest motivators in the market, with the hurricane, rising fuel prices etc, some may fear vacations this year could suffer. Not as many people willing to fly or drive to ports. In addition, seeing how this last storm was broadcasted, everyone is on edge and so the smallest name storm could cause panic,cancellations etc... Being a stock holder in Royal myself, just gotta ride it out! 

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