RCL Shares

[Intr3pid]

It looks like the RCL stock is now down to about $50 per share from a high of $135 in February. What I am seeing though is that most folks are just postponing their trips. Of course, if a recession strikes, the demand may soften everywhere. You could end up with a $25 stock.

Ignoring the fair value for a moment, I see that - at the current prices - the stock pays a roughly 5% dividend. If I factor in a $250 stateroom credit for our annual Celebrity cruise (for every 100 shares), that's another 5% yield. In other words, the stock is providing a roughly 10% annual yield for those cruising one of its three brands, and then there is a possibility of the price going back up a sizable chunk next year.

What do you guys think? Good way to lower your cost of cruising?

 

[OKW Lover]

I bought shares a day or two ago just for the potential appreciation.

 

[Ben E N]

I am in no way a financial advisor, but it looks like that stock is way undervalued to me. It will linger down there for a while, as not cruising is a hot topic right now, and then a potential recession will hit, but it's not like people associate cruises with actually getting sick. I might even buy a few shares at that price.

 

[starvenger]

This combined virus/oil crisis is killing my RRSP! Not close to being in the red or anything, but those price drops are no bueno.

But yeah, it's not a bad idea to buy right now, but remember that it's still the stock market, and you never know, so don't bet the farm speculating on a bounce back.

 

[hertamaniac]

I think there is a potential of longer term effects on the downward trend on price. The loss in revenue will certainly effect the quarterly reporting and I suspect it will cause a further drop. Of course, I could argue that the current price already factors that in.

Still, I am planning to buy some shares this week.

 

[hertamaniac]

Ignoring the fair value for a moment, I see that - at the current prices - the stock pays a roughly 5% dividend.

I guess a question is would they be forced to cut/reduce the dividend payouts?

 

[OKW Lover]

I guess a question is would they be forced to cut/reduce the dividend payouts?

I'd think that is highly likely and actually prudent on their part in order to preserve cash balances.

 

[hertamaniac]

I'd think that is highly likely and actually prudent on their part in order to preserve cash balances.

In my experience, once a company reduces the dividend payouts to the shareholders it is immediately followed with a heavy reduction on the stock price. If they go down this route, I would expect to see it announced a few months out from today.

 

[Ben E N]

I hope no one bought at the beginning of today. I was quite tempted but glad I held off.
What a weird world we are living in compared to just 2 weeks ago.

 

[OKW Lover]

In my experience, once a company reduces the dividend payouts to the shareholders it is immediately followed with a heavy reduction on the stock price.

Of course it does. The potential shareholder and the existing shareholder view the potential future return on the stock as less attractive at that point.

 

[Intr3pid]

Typically, dividends are stickier than earnings, but if they foresee a continuous bout of lower earnings, they will likely act. The "cruise with confidence" policies are designed to keep bringing the cash in - or a least prevent a cash crunch.

My main concern is the debt load. About $12bn in net debt with 1:1 debt-to-equity ratio. I suspect they will hold off on some of the ship renovations (amped/revolution) to conserve cash, as this summer season - sadly the best season of the year and the largest source of operating cash - is a writeoff.

On a positive note, with a pandemic alert, one of the more punishing pieces of news is already out. Some of the heavier selling is behind us, and now all eyes will be on how fast the virus spreads in the western hemisphere - and the next earnings report at the end of April.

 

[OKW Lover]

On a positive note, with a pandemic alert, one of the more punishing pieces of news is already out. Some of the heavier selling is behind us, and now all eyes will be on how fast the virus spreads in the western hemisphere - and the next earnings report at the end of April.

Indeed they have a built in excuse for a bad quarter/year. I suspect that the financial folks at all the cruise lines are thinking "if you're going to have a bad quarter/year, have a BAD one". So all kind of other things will come off the reserves as well.

 

[hertamaniac]

Pre-market has this stock pummeling. Down to ~$33/share. I still don't think we're near an inflection point and when someone said $25/share, they may not have been far off.

 

[John VN]

Have a little "Limbo" song on my mind so waiting game might be advisable. How about the little artificial spike a bit ago.

 

[Intr3pid]

I think the market is currently pricing in a complete spring/early summer shutdown of the cruise season.

If the virus does slow down in the summer, cruising season restarts, flights resume, and cases tail off - all amidst a $35 oil - we might see a sizable spike. And it looks like RCL has secured short-term financing, so even if cruises have to be cancelled, they can still make it through.

https://finance.yahoo.com/news/air-cruise-lines-shore-liquidity-162658135.html

 

[tinatark]

RCCL stock is currently $20/share. Thinking of jumping in at some point for 100 shares for the OBC when cruising. I would just reinvest dividends, so not really worried about that.

Current offer is $100 OBC for a 7 night sailing. We cruise a few times a year usually. Would just buy and hold.

 

[Intr3pid]

I would also look at buying 100 NCL shares. There is a $100 shareholder OBC for a 7-night cruise and the stock is at $7. There aren't any dividends, but that may actually help in the current liquidity situation. They also don't have any major ship rollouts/refurbishment planned in the next couple of years. Higher debt burden though.

 

[DisMommyTX]

As a traveler, I am really impressed enough with how RCCL is handling this situation to consider investing with them as well. We are approaching the 90 day mark for our July cruise. I started looking into it today with a reasonable expectation that we would cancel, then just rebook later if we were able to travel. My biggest concern is that the current international travel restrictions placed by our employers may be extended, but we really have no way of knowing right now. So, I found RCCL's policy:

"For sailings departing on or before July 31st, 2020: Cruise with Confidence: Cancel up to 48 hours before you sail and get a future cruise credit good through 2021." So far, standard cancellation policy applies for all sailings after July 31st.

This is exactly what we needed to hear! Because of this, we did NOT cancel our July sailing. If we do end up unable to travel this summer, the credit will ensure that we book our next sailing on RCCL. As long as they can weather the immediate crisis, their policies are sound. We'll be looking at options to purchase at least 100 shares in the next few days.

 

[spiders]

So, I'll go ahead and admit that this will (hopefully) go down as my worst ever stock purchase. I mean, I would hope I couldn't beat myself for a worst pick. Well, actually come to think of it...I owned some TWA stock. That was the worst. This is a close second.

Fortunately, I only initially purchased 50 shares, but....I purchased at $133. I also bought another at 50 when they went down to $30. Well, the roller coaster continues down.

 

[hertamaniac]

Didn't pull the trigger last week and it looks like the sub $25 threshold has happened. Now, I am thinking that $15 is realistic even with the government aid.