Why Royal Caribbean Stock Is Down By 5% Today

Royal Caribbean Stock Drops Amid Virus Fears

Shares of Royal Caribbean are under strong pressure today amid fears about the spread of the Delta variant of coronavirus.

Other cruise line stocks like Carnival and Norwegian Cruise Line Holdings are under significant pressure as well. American Airlines, Delta Airlines, United Airlines are also falling, highlighting the broad fear about the near-term future of the travel industry.

It should be noted that recent data suggested that domestic demand for travelling was very strong, but the market fears that a potential surge of new cases caused by the Delta variant of coronavirus may lead to new restrictions or scare potential travellers.

What’s Next For Royal Caribbean Stock?

Royal Caribbean shares have already dropped by more than 30% from highs that were reached back in February. However, it remains to be seen whether traders will rush to buy the stock after the recent correction.

Analysts expect that Royal Caribbean will report a loss of $13.61 per share in 2021 which will be followed by a profit of $2.07 per share in 2022. At current price levels, the stock is trading at about 33 forward P/E which is not cheap.

It should be noted that Royal Caribbean has significantly increased its long-term debt during the pandemic which makes the stock more sensitive to bad news.

I’d also note that many traders have probably waited for any significant pullback in the market, and we’ll probably see an attempt to rebound in the upcoming trading sessions as those traders establish new positions.

Cruise line stocks have lost a lot of ground in recent weeks so they may attract speculative traders who want to bet on a broad market rebound. The main risk for Royal Caribbean is the potential deterioration of the situation with coronavirus, but traders should keep in mind that there is no evidence that demand for travelling is declining at this point.

For a look at all of today’s economic events, check out our economic calendar.