Royal Caribbean Sails Toward 12-Month High as Earnings Top Forecasts

Royal Caribbean Group (RCL) rose to a near one-year high Monday, gaining 9.33% after the cruise line operator beat Wall Street’s bottom-line expectations.

The Miami-based leisure company reported a large fourth quarter (Q4) loss of $1.1 billion, or $5.02 per share, while analysts had anticipated a loss of $5.04 a share. However, the figure plunged from the $1.42 earnings per share (EPS) profit reported in the year-ago quarter amid ongoing cruise cancellations. Meanwhile, revenues for the period sank to $34.1 million, down from $2.5 billion in the December 2019 quarter.

Management reiterated during the earnings call that it expects the company’s monthly cash burn to remain in the $250- to $290 million range during the suspension of operations. In its latest update on Feb. 18, the company said via its website that it had extended the suspension of its global fleet through April 30, 2021, except for select voyages departing from Singapore and China.

CEO Richard Fain provided a glimmer of hope, telling CNBC’s Seema Mody that early bookings data for the current quarter – particularly for older customers – indicates a surprisingly positive post-Covid recovery. “Some of the things we thought were going to happen aren’t happening. They’re better than we thought,” he said.

Through Monday’s close, Royal Caribbean stock has a market capitalization of $20.47 billion and trades 15.45% higher since the start of the year. Over the past 12 months, the shares trade underwater by around 19%.

Wall Street View

Last month, Deutsche Bank analyst Chris Woronka bumped the investment firm’s price target on the stock to $62 from $46 while maintaining his ‘Hold’ rating. Woronka sees uncertainty remaining for the first half of 2021, with more sailings resuming in the second half of the year.

Elsewhere, most other broker coverage recommends sitting on the sidelines for now. The stock receives 7 ‘Hold’ ratings, 3 ‘Buy’ ratings, 2 ‘Underweight’ ratings, and 1 ‘Sell’ rating. Price targets range from a Street-high $100 to $48 low, with the median target pegged at $61. Look for re-ratings in the coming weeks as analysts get a better understanding of the cruise operator’s short- to mid-term outlook.

Technical Outlook and Trading Tactics

Royal Caribbean’s better-than-expected earnings helped its share price break above a multi-month horizontal trendline to reach its highest level in almost a year. The move occurred on above-average volume, increasing the probability of follow-through buying in subsequent trading sessions.

Those who buy the breakout should set a take-profit order at the pre-pandemic double top around $135, where the price may encounter overhead resistance. Protected against a reversal with a stop placed somewhere below the 50-day simple moving average (SMA).

For a look at today’s earnings schedule, check out our earnings calendar.