Should You Invest in Royal Caribbean?

PHOTO CREDIT: Royal Caribbean

OVERVIEW

The Royal Caribbean Group operates several cruise lines around the world. They operate Royal Caribbean, Celebrity, and several other cruise brands. The company has 61 ships and 17 others on order to be distributed through all its brands. The company was founded in 1968.

Why You Should?

1. The COVID-19 Pandemic has decimated the demand for cruise sailings. However, the demand seems to be coming back. Though cruises aren’t sailing in the near future, Royal Caribbean reported strong demand for cruises next year. This strong demand will help the company out of this pandemic.
2. The stock will go up for any positive COVID-19 Vaccine news. This has been coming frequently as there are over 100 companies making a vaccine. Once people get vaccinated, demand for cruise sailings will return. This will benefit Royal Caribbean in the long term.

Why You Should Not?

1. The COVID-19 Pandemic has decimated cruise demand. Royal Caribbean makes a bulk of its revenue in the United States. The US government has temporarily paused cruise sailings. This has left Royal Caribbean without revenue for months now. This has negatively impacted the company’s balance sheet and its future.
2. A lack of revenue for a long period of time hurts Royal Caribbean in several ways. Forst, they had to increase its debt load to maintain operations. They used several ships as collateral to this debt. An increase of debt has also demolished the company’s balance sheet which prevents it from taking on more debt if needed.
3. Consumer sentiment towards cruise lines is not positive. Several large outbreaks were reported on cruise lines around the world. None of these were handled properly and the news quickly made headlines around the world. People won’t be comfortable going on a cruise line any time soon.
4. The US is struggling to contain this virus. This might force it to block cruise sailings for a longer period of time. Because Royal Caribbean makes a bulk of its revenue from the United States, this will negatively impact the company.

MY OPINION

If you believe that cruise and travel demand will return to normal levels, I highly recommend picking up stocks like Royal Caribbean up at these low prices. However, investors should not expect Royal Caribbean to recover this year. They won’t be able to bring in revenue until this virus is contained and sailings can resume again.