NCL Stock. Coming back up?

[yellowsnow]

What do you think? There was a recent drop in the price and I am thinking it may be a good time to get some, hoping to sell short term and make a small profit.

 

Anyone has any theories on why the stock dropped almost 10%? Do you think it'll come back up soonish? :rolleyes:

[Mark_K]

What do you think? There was a recent drop in the price and I am thinking it may be a good time to get some, hoping to sell short term and make a small profit.

 

Anyone has any theories on why the stock dropped almost 10%? Do you think it'll come back up soonish? :rolleyes:

I'm thinking you should ask on the NCL board.

[JanineM]

You mean RCL - right?

 

Why is the price down? I'm no analyst but consider this:

- The market in general is down.

- It's earning season which makes things a bit wanky sometimes.

- The oil leak in the Gulf will likely cause havoc with fuel prices and possibly affect the desirability of sailings through the Gulf of Mexico and possibly through the Caribbean.

- Most people are still affected by the recession and are watching their discretionary spending.

- RCL is wagering more on the European market and it is extremely unstable.

 

Do I personally think the price is likely to go up? Maybe in the long term ... but I wouldn't bet on a quick increase in share price. Here's my general unsolicited advice on single stock purchases. If you can afford to burn the money then go for it. If the value increases over the longer term (5-7 years) then fantastic. If not, hopefully you've gotten the shareholder credit out if it!

[harms081]

I'm thinking you should ask on the NCL board.

 

NCL does not offer stock.

[Mark_K]

NCL does not offer stock.

In that case, I think they should type more carefully. :)

[mtchg]

Better Buy: Carnival or Royal Caribbean Cruises?

By Motley Fool Staff

December 7, 2009

 

 

In a new Motley Fool series, we pit two stocks against each other on five criteria to determine the better buy.

 

Today's matchup is Carnival (NYSE: CCL) vs. Royal Caribbean Cruises Ltd. (NYSE: RCL). Using five short-of-scientific-but-carefully chosen criteria, let's determine which is the better buy according to the numbers:

 

Factor

Carnival

Royal Caribbean Cruises Ltd.

 

Cheapness

(P/E ratio)

16.8

33.5

 

Growth

(5-year growth rate)

3.1%

-12.4%

 

Operations

(net margin %)

14.85%

2.72%

 

Balance Sheet

(debt/equity ratio)

.47

.98

 

CAPS Rating

(scale of 1 to 5 stars)

 

 

 

 

Round 1: Cheapness

 

Advantage: Carnival. Cheapness is determined by P/E ratio. The lower the better. Be careful of earnings near zero that skew the ratio, one-time gains and losses, and pasts that aren’t indicative of futures (the more dynamic the industry, the more this is true).

 

Round 2: Growth

 

Advantage: Carnival. Growth here is the trailing 5-year EPS growth rate. This trailing earnings growth helps put notoriously-optimistic Wall Street projections in perspective.

 

Round 3: Operations

 

Advantage: Carnival. Net margin percentage shows how efficiently a company turns revenue into profit. The more similar the business models, the more relevant the comparison.

 

Round 4: Balance sheet

 

Advantage: Carnival. As with net margins, the debt to capital ratio is most relevant in comparing companies in similar industries. In this battle we give the nod to the lower-debt company, but attention should also be paid to the cost of debt, interest coverage ratios, and the stability of the business (the more stable a company’s operations, the more debt it can safely carry).

 

Round 5: CAPS rating

 

Advantage: Royal Caribbean Cruises Ltd.. A company’s CAPS rating is our community’s opinion of the stock. Royal Caribbean Cruises Ltd. has a slightly greater numerical CAPS rating than Carnival's (even though they have the same number of stars).

[yellowsnow]

I'm thinking you should ask on the NCL board.

 

Oops! I mean RCL, sorry.

[yellowsnow]

You mean RCL - right?

 

Why is the price down? I'm no analyst but consider this:

- The market in general is down.

- It's earning season which makes things a bit wanky sometimes.

- The oil leak in the Gulf will likely cause havoc with fuel prices and possibly affect the desirability of sailings through the Gulf of Mexico and possibly through the Caribbean.

- Most people are still affected by the recession and are watching their discretionary spending.

- RCL is wagering more on the European market and it is extremely unstable.

 

Do I personally think the price is likely to go up? Maybe in the long term ... but I wouldn't bet on a quick increase in share price. Here's my general unsolicited advice on single stock purchases. If you can afford to burn the money then go for it. If the value increases over the longer term (5-7 years) then fantastic. If not, hopefully you've gotten the shareholder credit out if it!

 

Those are great points. I have heard the argument that the economy is actually getting better and people are starting to spend money on things like vacations and new clothes. I felt the move from the west coast to Europe was not necessarily a bad move. It seems according to their calculations they would make more money in Europe than in the west coast, also I think the itineraries are more exciting in Europe than in the Mexican riviera and I don't feel very pessimistic about the European debt crisis.

 

Thanks for your thoughts!

[yellowsnow]

Better Buy: Carnival or Royal Caribbean Cruises?

By Motley Fool Staff

December 7, 2009

 

 

In a new Motley Fool series, we pit two stocks against each other on five criteria to determine the better buy.

 

I think the article is a little old to be directly relevant, for example Carnival has a more expensive stock right now. But it is interesting to notice that this was around the time Oasis of the Seas was inaugurated. I wonder how The inauguration of Allure will affect RCL stock? I feel like Oasis was a big deal for RCL.

[Ocean Boy]

NCL does not offer stock.

 

So it isn't likely to go up, right?:D

[negc]

Buying either RCI or Carnival stock a year or more ago would have produced spectacular results. Now things are less volatile and the growth or decline in the value of the stocks is more moderate. Buying stock for anything but a long term investment can be very perilous but buying it as a long term investment, as with any stock can have a positive result as the market has traditionally out-performed many other investment vehicles. These boards are really not the appropriate price to get good, reliable financial advice. Better that you consult a professional in that area who can look at your entire financial situation and advise you on strategies that will best meet your needs. Speculation here, including anything I may say, is just that speculation and has little or no true value.:rolleyes:

[mtchg]

I think the article is a little old to be directly relevant, for example Carnival has a more expensive stock right now. But it is interesting to notice that this was around the time Oasis of the Seas was inaugurated. I wonder how The inauguration of Allure will affect RCL stock? I feel like Oasis was a big deal for RCL.

 

Good points. RCCL isn't going anywhere, but it's been a consensus for a long time that Carnival is on more solid footing financially.

 

Mitch

[yellowsnow]

Buying either RCI or Carnival stock a year or more ago would have produced spectacular results. Now things are less volatile and the growth or decline in the value of the stocks is more moderate. Buying stock for anything but a long term investment can be very perilous but buying it as a long term investment, as with any stock can have a positive result as the market has traditionally out-performed many other investment vehicles. These boards are really not the appropriate price to get good, reliable financial advice. Better that you consult a professional in that area who can look at your entire financial situation and advise you on strategies that will best meet your needs. Speculation here, including anything I may say, is just that speculation and has little or no true value.:rolleyes:

 

I don't consider it financial advice. Just killing time. It does seem that the last month or so the RCL stock was very volatile, which is why I brought it up.

[negc]

I don't consider it financial advice. Just killing time. It does seem that the last month or so the RCL stock was very volatile, which is why I brought it up.

 

No,very volatile describes the performance of the stock last year. Check out the percentage increase in RCI's stock a year ago with its current value. In the past month or so the fluctuations have been well within normal parameters.

[yellowsnow]

No,very volatile describes the performance of the stock last year. Check out the percentage increase in RCI's stock a year ago with its current value. In the past month or so the fluctuations have been well within normal parameters.

 

You are right, in the past year the stock more than doubled and it had been increasing steadily until about a month ago. I guess volatility doesn't account for whether the price is going up or down and I misused the word, but the price HAS been decreasing for the first time in a year and at a slightly higher rate than it was increasing before. If only I had a time machine :rolleyes:

[Sue L]

You are right, in the past year the stock more than doubled and it had been increasing steadily until about a month ago. I guess volatility doesn't account for whether the price is going up or down and I misused the word, but the price HAS been decreasing for the first time in a year and at a slightly higher rate than it was increasing before. If only I had a time machine :rolleyes:

 

Quintupled plus not doubled, I bought it at high $5's, and now around $30, I bought lots of shares for investment and it is paying off. LOL

[foxgoodrich]

Remember that the "cheapness" factor isn't really a comparison of the price per share for the 2 stocks, even though a share of RCCL costs less than a share of Carnival. It's a ratio of the price of stock divided by the earnings per share for each stock. CCL has a better P/E ratio than RCCL (lower is better). This means that CCL is making a better profit (earnings) in comparison to the price of the stock. So in terms of "value" it looks like CCL is a better value if you look at the fundamentals of each company right now.

 

As of today RCL has a P/E of 22.52 and CCL has a P/E of 17.35. But if you look at these factors compared to the Dec info posted by MTCHG, you can see that RCL is reducing it's P/E substantially and CCL's is going up slightly. (In Dec 09 RCL's P/E was 33.5 and CCL's P/E was 16.8.) This shows that RCL is becoming more efficient with it's business operation since the P/E has gone down by a third in 5 months. That's actually pretty impressive!

 

Another factor to consider is dividends - CCL is currently paying a 40 cent per share dividend annually, while RCL has no dividend right now. So 100 shares of CCL would also generate a $40 "bonus" each year no matter how the stock performs. (It's paid quarterly, so that would be $10 per quarter on 100 shares.) No divvy with RCL.

 

And still another factor to consider is the 1 year price target for each stock. The price target can give you a sense of the market analysts' projected growth for each corporation over the next 12 months. CCL closed today at 37.02 and has a 1 year price target of 41.48. RCL closed today at $29.82 and has a 1 year price target of 37.65. (Keep in mind that the price targets are just analyst's opinions and there's no guarantee!) So if you look at that factor, plus the fact that RCL is looking leaner and meaner as a business right now as evidenced by the reduction in the P/E, RCL appears to be heading for more growth than CCL in the next 12 months.

 

I can't give you advice on whether you should buy the stock, but one thing I will advise you on is this: DON'T buy stock for the OBC! (You can get a $100 OBC on a 6-9 night cuise if you own 100 shares of RCL.) Invest in a company because you believe it will grow and make money for you over the long term. The OBC is only 100 bucks, and in this market you can lose more than that in a day because if you own 100 shares, you lose a dollar each time it goes down 1 cent. So if the stock price goes down by a dollar and you own 100 shares, you lose 100 bucks!

 

I do agree that the economy is improving. And the market is down across the board, so it's a great time for "bottom feeding", or buying stocks when they are down. Most people paid way less income tax this year than last year and have more vacation money, and I think RCL will bounce back at some point. HOW MUCH it will bounce back, I can't predict, and I wish I had a crystal ball to figure out WHEN! Do some more research before you buy, make your decision based on profit and growth potential, and check out the Motley Fool web site for information and the advice of successful investors. Yahoo Finance also has info (and is easier to access), but you'll find better analysis at Motley Fool IMO. Good luck!!

[yellowsnow]

Remember that the "cheapness" factor isn't really a comparison of the price per share for the 2 stocks, even though a share of RCCL costs less than a share of Carnival. It's a ratio of the price of stock divided by the earnings per share for each stock. CCL has a better P/E ratio than RCCL (lower is better). This means that CCL is making a better profit (earnings) in comparison to the price of the stock. So in terms of "value" it looks like CCL is a better value if you look at the fundamentals of each company right now.

 

As of today RCL has a P/E of 22.52 and CCL has a P/E of 17.35. But if you look at these factors compared to the Dec info posted by MTCHG, you can see that RCL is reducing it's P/E substantially and CCL's is going up slightly. (In Dec 09 RCL's P/E was 33.5 and CCL's P/E was 16.8.) This shows that RCL is becoming more efficient with it's business operation since the P/E has gone down by a third in 5 months. That's actually pretty impressive!

 

Another factor to consider is dividends - CCL is currently paying a 40 cent per share dividend annually, while RCL has no dividend right now. So 100 shares of CCL would also generate a $40 "bonus" each year no matter how the stock performs. (It's paid quarterly, so that would be $10 per quarter on 100 shares.) No divvy with RCL.

 

And still another factor to consider is the 1 year price target for each stock. The price target can give you a sense of the market analysts' projected growth for each corporation over the next 12 months. CCL closed today at 37.02 and has a 1 year price target of 41.48. RCL closed today at $29.82 and has a 1 year price target of 37.65. (Keep in mind that the price targets are just analyst's opinions and there's no guarantee!) So if you look at that factor, plus the fact that RCL is looking leaner and meaner as a business right now as evidenced by the reduction in the P/E, RCL appears to be heading for more growth than CCL in the next 12 months.

 

I can't give you advice on whether you should buy the stock, but one thing I will advise you on is this: DON'T buy stock for the OBC! (You can get a $100 OBC on a 6-9 night cuise if you own 100 shares of RCL.) Invest in a company because you believe it will grow and make money for you over the long term. The OBC is only 100 bucks, and in this market you can lose more than that in a day because if you own 100 shares, you lose a dollar each time it goes down 1 cent. So if the stock price goes down by a dollar and you own 100 shares, you lose 100 bucks!

 

I do agree that the economy is improving. And the market is down across the board, so it's a great time for "bottom feeding", or buying stocks when they are down. Most people paid way less income tax this year than last year and have more vacation money, and I think RCL will bounce back at some point. HOW MUCH it will bounce back, I can't predict, and I wish I had a crystal ball to figure out WHEN! Do some more research before you buy, make your decision based on profit and growth potential, and check out the Motley Fool web site for information and the advice of successful investors. Yahoo Finance also has info (and is easier to access), but you'll find better analysis at Motley Fool IMO. Good luck!!

 

Wow thanks for all these great thoughts! I am don't cruise enough to make the OBC worth the risk :rolleyes: maybe when I get to retire and I take 10+ cruises a year I can make it worth it. Those are like tax free dividends, right? Speaking of which, I don't consider dividends a lot because it seems that the price of a stock adjusts itself to compensate for dividends. Does that make sense?

[Gonzo70]

\Those are like tax free dividends, right? Speaking of which, I don't consider dividends a lot because it seems that the price of a stock adjusts itself to compensate for dividends. Does that make sense?

 

Yes, the OBC is tax free.

 

Stocks do lose value when they pay dividends by an equal amount of the dividend. If a stock pays say a 25 cent per share quarterly dividend, then the stock price drops 25 cents on the ex-dividend date. Essentially when a company pays a dividend, it is giving away some of it's assets - and this in turn lowers the value of the company (and the stock price). While dividends are nice, sometimes people overemphasize their benefit - they are not exactly "free money" as some think.

 

I think Royal is doing the right thing by not paying a dividend right now. They have very high debt because of their new builds, and the stock price will do much better if they put their money into paying down debt and growing the company rather than paying out a dividend.

[foxgoodrich]

Yes, I agree - RCL isn't in a position to pay a dividend and paying down debt is the smartest thing they can do now.

 

The OBC is not taxed as income, but stock dividends are subject to income tax.

[mtchg]

Yes, I agree - RCL isn't in a position to pay a dividend and paying down debt is the smartest thing they can do now.

 

The OBC is not taxed as income, but stock dividends are subject to income tax.

 

 

Some very instructive posts above. Personally, I...like many folks (up till now) don't buy individual stocks; just contribute to a managed portfolio.

 

Still, just as an investing excercise from those of you in the know: Putting aside your personal preferences as far as cruise experiences; and keeping in mind most investing should look toward long term performance:

 

If you invested in 100 shares of each of the "Big 2"..RCCL/CCL....which stock will perform better in the next TEN YEARS; based on both of their histories, their current philosophy, etc.. no wrong answers here; just interested on what folks have to say?

 

 

Mitch

[yogimax]

If you invested in 100 shares of each of the "Big 2"..RCCL/CCL....which stock will perform better in the next TEN YEARS; based on both of their histories, their current philosophy, etc.. no wrong answers here; just interested on what folks have to say?

 

 

Mitch

 

Given a ten year parameter, the odds would be that they would perform pretty much in lock step with each other. They are both affected by the price of oil, consumer demand, the general economy, etc., etc..

 

Having said that, the greater worry for RCL may be over capacity. What happens when the initial excitement for the mega ships wears down and they start to show their age? What happens when the ships can't be filled with paying customers, yet fixed costs remain the same?

 

Overall, either company can easily be recommended to be part of a balanced portfolio, but neither should be the dominant issue.

[negc]

Given a ten year parameter, the odds would be that they would perform pretty much in lock step with each other. They are both affected by the price of oil, consumer demand, the general economy, etc., etc..

 

Having said that, the greater worry for RCL may be over capacity. What happens when the initial excitement for the mega ships wears down and they start to show their age? What happens when the ships can't be filled with paying customers, yet fixed costs remain the same?

 

Overall, either company can easily be recommended to be part of a balanced portfolio, but neither should be the dominant issue.

 

The same can be said of Carnival as far as over capacity. It may not have ships as big as RCI's two megaships, but they still have a lot of berths to fill. The solution for both companies is to expand the market and Oasis and Allure seem to be ideally suited to doing just that since they may appeal to many folks who have never cruised before. By the time those ships begin to show their age, and you are probably talking a decade or more from now, the economy will likely be quite different than it is now and new builds might not be as improbable as they currently are. Prices are recovering from bargain basement levels so profitabity, if fixed costs remain the same, would paint a much different and much more positive picture than your scenario does.

We can play "what if" forever but that's all we are doing. What will happen,will happen and making good decisions about the future of their respective lines is supposedly what the executives get those big bucks for.:D

[foxgoodrich]

I do buy individual stocks, but if I knew how to predict stock movement over a ten year period, I'd be cruising on my yacht now with a nice drink in my hand, served by a young hottie in a Speedo. (To be fair, I guess we'd also have a Hooters girl aboad to serve DH his drinks....) :)

 

Yogimax has a very good point in that the jury's still out on whether RCL's megaships will pay off over time. I've heard rumors that they aren't filling Oasis now, but they're only rumors and I haven't seen big dramatic price drops, so I really don't know how difficult it is to fill the big ships. Oasis and Allure are destination ships in themselves, and they are too big for many ports, so the bookings seem to be coming from cruisers for whom the ports are less important than the ship experience. Whether this is a novelty or a trend is hard to predict. Will people cruise once on Oasis, or will they keep coming back because they love the ship?

 

I saw something on the Travel Channel awhile back that I found interesting - for cruise ships to make a profit, they must sail at full capacity and every single passenger has to spend an average of about $10 per day on stuff not included in the basic cruise fare. The fares we pay to cruise just gives them a break even scenario, assuming the ship is filled. The real profit maker is bar drinks. Now I know I'm inclined to have a mojito or two every day on a cruise, so they're getting that revenue from me, and I've seen enough s*%tfaced drunks on ships to know that some folks contribute a lot more than 10 bucks a day to the bottom line, but the children on any given ship don't buy drinks and many cruisers don't spend much on alcohol. There are other money makers of course, like excursions, shops, spa, etc., but the question is how much each passenger is willing to spend on board on a daily basis.

 

So any cruise line has to have adept bean counters in charge to make it work. I don't see huge differences in the business models, and as NEGC pointed out, fixed costs will affect both corporations in the same way. The big question is whether one line can outshine/outmarket the other in drawing the most passengers, enjoying more loyalty from repeat customers, and keeping the berths filled. I think Yogi is right and the two stocks would likely be pretty lock step.

Judy

[Gonzo70]

I too feel they are likely to trade similarly (with Royal likely being more volatile - i.e. going up a bit more when the market does well, but going down more sharply when the market does poorly). One thing to consider is that Royal has a significantly higher debt ratio, so they are at higher risk to go under if there is a prolonged deep recession. That said, they also have a bit more room for growth if the economy starts booming. My two cents is that Royal is riskier (greater chance of losing all or most your money, but also greater chance of making a good deal of money), but in general they will trade in the same direction.