RCL Stock

[grandgeezer]

I’ve been dabbling in the stock market for over 40 years and have done quite well. I have two starting rules, believe in the product or service the business is in, and believe in the executive management staff. In my opinion, RCL is 0 for 2 for these two categories. Even when it was below $20 per share, there was no consideration about buying. This could be said about all lines based on the way they handled the pandemic and the start up as things got better.

[RobInMN]

10 minutes ago, At Sea At Peace said:

 

That's an accurate statement, but only with regards to 'the same time' which was a 'current' (2-week) perspective per @BermudaBound2014

 

Over a post-pandemic time period perspective, not so much the case (DJI and Nasdaq):

 

Also, the short interest is 6% 9% and 11% for RCL, NCL and CCL.

 

You can't say "over a post-pandemic time period" and then start you graph pre-pandemic. If you start after the initial pandemic crash (I used 12-MAR-2020), RCL looks pretty good:

[At Sea At Peace]

2 minutes ago, RobInMN said:

You can't say "over a post-pandemic time period" and then start you graph pre-pandemic. If you start after the initial pandemic crash (I used 12-MAR-2020), RCL looks pretty good:

 

 

Actually, I would infer anyone to choose to view the chart in either format, yours or mine, or their own.  I don't have a preference. 

 

Using the exact post-pandemic date suggested for the stocks and indices that I used doesn't account for the massive and divergent % drop prior to such date.  Clearly, if the three cruise line stocks dropped so much more significantly than the compared indices, then using such a starting at that point would even possibly 'look pretty good' (i.e., because their pandemic drops were so massive).  The DJI and Nasdaq were not at comparative lows at the time that RCL, NCL and CCL were in 2020.

 

Going forward, they are all in for a nasty ride after what hopefully will be a really decent summer.  

 

Over Supply and Under Demand with Supply Increasing

 

Inflationary Impact on Flying, Driving and/or Hotel Costs To and From a Cruise

 

Massive Inflationary Impact on Cost of Operations - Food and Supplies

 

Extraordinary Inflationary and Supply Stretched Cost of Diesel Fuel - 80,000 Gallons a Day (Large Ships) Depending on Diesel Fuel type (other CC members are more versed in such)

 

https://www.windstarcruises.com/blog/how-much-fuel-cruise-ship-uses/#:~:text=Cruise ships use either gas,ultimately moves the ship forward.

 

Fuel Hedges likely Fully Utilized; Future Hedges at Today's Price Unrealistic

 

Huge Debt Service Costs on Bloated-to-the-MAX Billions of New Debt (Pandemic Survival) and 'Refi's' at a Rate Savings Gone

 

🙄

[Baron Barracuda]

Don't know what anyone can hope to learn from charts of a company that was basically shut down for two years, doesn't have all their ships back in operation, is currently sailing at reduced loads, has experienced massive balance sheet destruction and  is not yet cash flow positive.  Better to monitor 10q's for signs of improvement. 

[Ocean Boy]

On 5/6/2022 at 12:45 PM, grandgeezer said:

I’ve been dabbling in the stock market for over 40 years and have done quite well. I have two starting rules, believe in the product or service the business is in, and believe in the executive management staff. In my opinion, RCL is 0 for 2 for these two categories. Even when it was below $20 per share, there was no consideration about buying. This could be said about all lines based on the way they handled the pandemic and the start up as things got better.

I tend to agree with your method of picking stocks. I was once told think about products that I use and then look at how those companies are managed. Two questions for you. When you say "believe in the product", do you not believe the concept of a cruise, or the product that RCI provides, is a good one? Second when you talk about how they handled the pandemic, aside from being closed down, what do you think they could have done better to gain more of your trust?

[DirtyDawg]

On 5/6/2022 at 1:07 PM, ChC said:

 

Although I agree with you in principle. However I think RCL is still the best positioned company in cruise industry to ride the storm out. It has a great product and has a great loyal following. Its IT is industry leading for its size (not perfect but still way ahead of peers). CCL may have to spin off one of two subsidiaries if the worst is here by next year. RCL already offloaded Azamara well ahead of the curve. RCL will be doing fine. $45-55 would be a great point to enter in short term. I am not buying yet. I am waiting for sub $50 or even south of $50. But I just do not see RCL ever go below $35 YET. It may change in future, but at this point of the time, $35-45 is my estimated low point SO FAR.

Please provide a rationale for your downside estimate. 

 

BTW, I was in the business as a portfolio manager for mutual funds and pension funds for over 25 years and If one of my analyst's walked into my office and told me what you wrote above I would not have said please. But now that I am retired from that industry I'm getting much more polite. 🙂

 

[firefly333]

23 minutes ago, Ocean Boy said:

I tend to agree with your method of picking stocks. I was once told think about products that I use and then look at how those companies are managed. Two questions for you. When you say "believe in the product", do you not believe the concept of a cruise, or the product that RCI provides, is a good one? Second when you talk about how they handled the pandemic, aside from being closed down, what do you think they could have done better to gain more of your trust?

Why I like rcl as a product, they were controlled by the cdc and shut down. Diluted by issuing more stock and now the country is heading into a recession.  GDP contracted 1st qtr and one more qtr is the definition of a recession coupled with powell and the fed lagging behind to cut inflation. Early on Powell played games to keep his job. Now he is reappointed but badly lagging. I read it will take 8 years at 91B to unwind all the paper the fed bought to keep the economy rolling. From what I've read powell still has not begun to sell any of this paper, be it mortgage backed securities or what all he bought. True he finally raised interest rates he had been holding down artificially.  

 

If he does finally unwind some of the paper debt he bought up liquidity will start drying up. Either powell has to sell the paper they bought up or inflation will continue to spiral out of control. Not just raising interest rates. 

 

I keep reading where people say greedy corporations made record profits. I rarely read wow look at how many corporations missed earnings. Exxon missed because they had to write off all their business in russia. And yet there is talk of punishing oil companies more. Verizon missed, maybe spectrum took business away. Amzn missing because of their investment into a ev maker. They also over expanded storage during covid and orders slowed down as prices and shipping is going up. People say well during xmas they will need more storage. Also unions moving in. Netflix also was a earnings shocker. They lost subscribers. They raised prices twice and went on the war path about sharing passwords. People quit. People are boycotting some products because companies thought it was ok to take a stance left. Not just disney but before that coke and that group. So it's a combination of factors, not just the war and also the china lockdown hurting companies. Politically powell seems to prefer what sounds like a good economy rather than dealing with inflation. His hand is being forced. He is way behind. he should have stopped buying paper last year and already been unwinding it from the balance sheets and quit adding to liquidity. 

 

I think it will get worse and people will wake up to what's going on. Right now all they see is some stocks sold off, and things cost more. Few except traders dig deeper. The topic shouldnt be when is rcl going up, but how much worse. 

[DirtyDawg]

On 5/6/2022 at 12:45 PM, grandgeezer said:

I’ve been dabbling in the stock market for over 40 years and have done quite well. I have two starting rules, believe in the product or service the business is in, and believe in the executive management staff. In my opinion, RCL is 0 for 2 for these two categories. Even when it was below $20 per share, there was no consideration about buying. This could be said about all lines based on the way they handled the pandemic and the start up as things got better.

I have to admit I bought some RCL stock back in early March 2020 while it was on it's way down. It was like catching a falling knife. I made a good return on the rebound but it was in no way an 'investment', rather pure speculation on my part. Like going to Vegas but without the showgirls. If fact, I had to pray for forgiveness from Benjamin Graham. (he was a father of value investing). 🙏

[firefly333]

9 minutes ago, DirtyDawg said:

Please provide a rationale for your downside estimate. 

 

BTW, I was in the business as a portfolio manager for mutual funds and pension funds for over 25 years and If one of my analyst's walked into my office and told me what you wrote above I would not have said please. But now that I am retired from that industry I'm getting much more polite. 🙂

 

I've done stocks over 40 years. Many years ago I was with Merrill back when people used brokers. He knew less about stocks than I did. 

 

The next thing cruiselines have to deal with may not be covid. My prediction is when china stops lock downs their consumption of oil will rise...affecting world price and demand for oil. Biden is taking amounts from our oil stockpile trying to keep oil down between now and nov elections.  .. .then what? 

 

My prediction is oil will go up further. Powell is behind curbing inflation as I noted above. 

 

My charts dont have a exact buying place for rcl, but higher oil prices wouldnt help. There are less risky stocks I'm watching to buy. 

[DirtyDawg]

45 minutes ago, firefly333 said:

I've done stocks over 40 years. Many years ago I was with Merrill back when people used brokers. He knew less about stocks than I did. 

LOL. I was with Merrill back in the day but on the institutional side (we ran the mutual funds and the pension fund clients. Some call it the Asset Management side). I was also with other firms over the years who had both institutional and retail sides and your experience about your Merrill retail broker was not an isolated one. Sadly, many retail brokers in the industry, over the years, would only merit a grade of C. 

 

Edited May 8, 2022 by DirtyDawg

[firefly333]

13 minutes ago, DirtyDawg said:

LOL. I was with Merrill back in the day but on the institutional side. I was also with other firms over the years who had both institutional and retail sides and your experience about your Merrill retail broker was not an isolated one. Sadly, many retail brokers in the industry, over the years, would only merit a grade of C. 

 

F not a C. I got into a flat fee for trading at a totally ridiculous price. Then they would not let me quit. Thousands maybe 5k cost to trade a year paid in advance. Then said I had to have given notice more than 6 months before or something ridiculous like gyms used to do to trap you into paying a extra year. I hope someone brought them to court. 

 

Anyway, before I left on this cruise I was listening to whatever earnings came out that made tv. I know cnbc and fbn biased, but doesnt hurt to see what they say why earnings were missed. Poor teledoc lost $43 a share. Wouldnt touch a company losing like that with no forecast of profitability. Rcl also has stopped saying when it expects to return to profitability as has ccl. It's the forecasts going forward, the well chips still in short supply, the war, china .. made stocks sell off. 

Edited May 8, 2022 by firefly333

[DirtyDawg]

7 minutes ago, firefly333 said:

F not a C. I got into a flat fee for trading at a totally ridiculous price. Then they would let me quit. Thousands maybe 5k cost to trade. Then said I had to have given notice more than 6 months before or something ridiculous like gyms used to do to trap you into paying a extra year. I hope someone brought them to court. 

 

Anyway, before I left on this cruise I was listening to whatever earnings came out that made tv. I know cnbc and fbn biased, but doesnt hurt to see what they say why earnings were missed. Poor teledoc lost $43 a share. Wouldnt touch a company losing like that with no forecast of profitability. Rcl also has stopped saying when it expects to return to profitability as has ccl. It's the forecasts going forward, the well chips still in short supply, the war, china .. made stocks sell off. 

But hey, Teldoc's  $43 per share loss in Q1 was mostly just Goodwill impairment. So what if they paid a wee bit too much for those acquisitions back in 2020. Ooopsy! 

[grandgeezer]

3 hours ago, Ocean Boy said:

I tend to agree with your method of picking stocks. I was once told think about products that I use and then look at how those companies are managed. Two questions for you. When you say "believe in the product", do you not believe the concept of a cruise, or the product that RCI provides, is a good one? Second when you talk about how they handled the pandemic, aside from being closed down, what do you think they could have done better to gain more of your trust?

Our opinion only, not looking for a debate.

 

Product: We started cruising in 2003. We eventually found Celebrity and Oasis class ships of RCL and were averaging about 43 days a year and was hooked. We spent money on the ship and thought we were in 7th heaven. Then prices started rising dramatically, and a bunch of the little things that made cruising disappeared. We also noticed a drop in service and quality of food. We didn’t think it was worth the money so we cut all the on board spending, which made no difference in the way we felt so we stopped cruising in December of 2016.

We started to miss cruising in 2018 so because we could afford it, we did 14 days on MSC Seaside in a Yacht Club suite, and 14 days on the Allure of the Seas in a Grand Suite. In 2019 we did 14 days in a Sky Suite on Celebrity Equinox, and repeated the MSC cruise. Then the pandemic came. we saw value in the MSC and RCL cruise but not the Celebrity one. With the current pricing we see no value in any of them.

Management: Besides the money grab mentioned above, I think management of all the lines blew the pandemic, start to present. Their whole industry was shutdown, and rather than fight for it, especially through the media, that sat back, quiet as a church mouse. Things didn’t start to happen until the governors of Florida and Texas started flapping their gums, with Alaska jumping in at the end. Now.. Things are turning around, the started sailing in August. It appears that they have dragged their feet, increasing capacity, so rather than lower pricing to get more people sailing they 

kept it lower so they could keep the premium price. That opens the door to raising the price even higher as they increase capacity. 

[Ocean Boy]

1 hour ago, grandgeezer said:

Our opinion only, not looking for a debate.

 

Product: We started cruising in 2003. We eventually found Celebrity and Oasis class ships of RCL and were averaging about 43 days a year and was hooked. We spent money on the ship and thought we were in 7th heaven. Then prices started rising dramatically, and a bunch of the little things that made cruising disappeared. We also noticed a drop in service and quality of food. We didn’t think it was worth the money so we cut all the on board spending, which made no difference in the way we felt so we stopped cruising in December of 2016.

We started to miss cruising in 2018 so because we could afford it, we did 14 days on MSC Seaside in a Yacht Club suite, and 14 days on the Allure of the Seas in a Grand Suite. In 2019 we did 14 days in a Sky Suite on Celebrity Equinox, and repeated the MSC cruise. Then the pandemic came. we saw value in the MSC and RCL cruise but not the Celebrity one. With the current pricing we see no value in any of them.

Management: Besides the money grab mentioned above, I think management of all the lines blew the pandemic, start to present. Their whole industry was shutdown, and rather than fight for it, especially through the media, that sat back, quiet as a church mouse. Things didn’t start to happen until the governors of Florida and Texas started flapping their gums, with Alaska jumping in at the end. Now.. Things are turning around, the started sailing in August. It appears that they have dragged their feet, increasing capacity, so rather than lower pricing to get more people sailing they 

kept it lower so they could keep the premium price. That opens the door to raising the price even higher as they increase capacity. 

Thank you. I am not looking to start a debate, just trying to understand. I did two cruises this year as I booked them with great pricing. I started to look at next year but booked nothing yet as I am unwilling to pay the prices that I'm seeing. And RCI is out of their minds for what they want to add on for a refundable deposit.

[At Sea At Peace]

7 hours ago, firefly333 said:

F not a C. I got into a flat fee for trading at a totally ridiculous price. Then they would not let me quit. Thousands maybe 5k cost to trade a year paid in advance. Then said I had to have given notice more than 6 months before or something ridiculous like gyms used to do to trap you into paying a extra year. I hope someone brought them to court. 

 

Anyway, before I left on this cruise I was listening to whatever earnings came out that made tv. I know cnbc and fbn biased, but doesnt hurt to see what they say why earnings were missed. Poor teledoc lost $43 a share. Wouldnt touch a company losing like that with no forecast of profitability. Rcl also has stopped saying when it expects to return to profitability as has ccl. It's the forecasts going forward, the well chips still in short supply, the war, china .. made stocks sell off. 

 

It's a mess all around.

 

The cruise lines are 'bit players' in this market spiral.

 

JUST 6 COMPANIES, Meta Platforms (FaceBook), Netflix, Amazon, Disney, Alphabet (Google) and Microsoft, giants in the investment portfolios of index, capital and hedge funds, private and public pensions, etc., for portfolio safety security and growth, are DOWN $3.4 Trillion in Market CAP using the 52-week share price low to high.

 

Meta Platforms (FaceBook) -56%

Netflix -75%

Amazon -40%

Disney -43%

Alphabet (Google) -27%

Microsoft -32%

 

That is just the tip of the iceberg; and it represents more than 1/3 of the Federal Reserves' Balance Sheet valuation (although not in the Balance Sheet; just a valuation comparison) and 10% of the entire 'hard' deficit of the United States.

 

Edited May 8, 2022 by At Sea At Peace

[At Sea At Peace]

There is a unique theory on inflation bandied about every so many years by all of the financial publication giants.

 

Inflation rewards hard non-depreciable assets.

 

Inflation punishes cash assets.

 

Inflation reduces the real cost of debt obligations.

 

This last one always intrigues.  The US has a massive hard debt deficit of some $30T+.  Worse, it has an estimated unfunded off-balance sheet obligations deficit of more than 4-times that amount.  If the value of the dollar suffers from inflation those future debts are settled at historic dollar value costs with ever increasing future inflated dollars.

 

Inflation is presented as a strategy to reduce the impact of existing debt.

 

For the cruise lines, again, bit players in the big picture; but applicable.  Inflated cruise pricing, along with all inflationary cost impacts across all spectrums, generate higher amounts of cash to settle historic, pre-inflation debt obligations.  The longer this goes on, the less the real cost of historic debt obligations become.

 

TAKE IT HOME - Remember when you bought your first home and that first years' monthly payment was a 'task?'  10 years later?  20 years later.  Not so much.  That's the principle.

[firefly333]

34 minutes ago, At Sea At Peace said:

For the cruise lines, again, bit players in the big picture; but applicable.  Inflated cruise pricing, along with all inflationary cost impacts across all spectrums, generate higher amounts of cash to settle historic, pre-inflation debt obligations.  The longer this goes on, the less the real cost of historic debt obligations become.

 

I believe the issuing more shares also is a factor. Dilutes what ever value a company losing money might have even more. 

 

This isnt where I'd put fresh money, especially as I believe oil prices havent peaked. I'm watching some cloud tech, have enough oil to balance me out. Could use more tech but not here, catching falling knives. Cloud companys did better than other tech. I'm watching for lower p/e s. 

 

I agree with what someone above said cruiselines sat back and werent proactive. 

[BermudaBound2014]

What an Interesting conversation 🙂

 

So of you might also be interested in this interview with Jason Liberty:

https://www.barrons.com/articles/royal-caribbean-cruise-ceo-outlook-51651863557?siteid=yhoof2

 

 

I'd like a definition of 'coming years" 🙂

Edited May 9, 2022 by BermudaBound2014

[DirtyDawg]

15 hours ago, At Sea At Peace said:

 

Meta Platforms (FaceBook) -56%

Netflix -75%

Amazon -40%

Disney -43%

Alphabet (Google) -27%

Microsoft -32%

 

Those price drops reminds me of my favorite movie quote. It's from Apocalypse Now when Lt. Col. Kilgore says;

“I love the smell of napalm in the morning.”  😁

[bruzin_for_a_cruizin]

How low can RCL go? I have some cash in my trading account waiting to buy so I can dollar-cost-average my holding down from $91/share. 

We are already at the 52-week low ($59.82)...

[Biker19]

7 minutes ago, bruzin_for_a_cruizin said:

How low can RCL go?

Tough to know when to catch a falling knife.

[Baron Barracuda]

In the past three years despite issuing millions of new shares Royal's stockholder equity has shrunk from $12B to $4B.  Haven't read through the boilerplate on their many debt issues but have to be concerned about what level of capital they need to maintain to satisfy debt covenants.  Further operating (not cash flow) losses could force them to issue additional shares and in a weak stock market any offering would take place at a price below the current market price.  This would not be good for current shareholders.

[Morecruisesplz]

5 hours ago, bruzin_for_a_cruizin said:

How low can RCL go? I have some cash in my trading account waiting to buy so I can dollar-cost-average my holding down from $91/share. 

We are already at the 52-week low ($59.82)...

I bought @ $22 just after Covid hit. Sold @ $50s but should have held on.

[At Sea At Peace]

3 hours ago, Baron Barracuda said:

In the past three years despite issuing millions of new shares Royal's stockholder equity has shrunk from $12B to $4B.  Haven't read through the boilerplate on their many debt issues but have to be concerned about what level of capital they need to maintain to satisfy debt covenants.  Further operating (not cash flow) losses could force them to issue additional shares and in a weak stock market any offering would take place at a price below the current market price.  This would not be good for current shareholders.

 

I'm into distressed debt.  🙄  Love the 'cycles and event driven opportunities also in the short-term for equities.

 

The major public cruise line debt 'structure' or 'portfolio' is very, very, very (yes 3 times) complex; with tiers stratified for senior unsecured (really secured by everything, however, not specifically sub-secured; i.e. by island, ship, port, etc.), ship or groups of ships, islands, port asset etc.  

 

It is really unique, and very complex.

 

An uncontrolled (i.e., NOT a pre-agreed upon plan or prepack) reorganization would be a */+-&^&$.

 

RCL appears to be between CCL (possibly 'too big to sail') and NCL (too small and too concentrated on North American based revenues).  CCL is so big the sub-parts could essentially be disembarked (i.e., sub-lines); but it is a nightmare if it unfolds unorganized.  NCL is so small it might be an easy target (MSC or foreign sovereign fund) but at less that the current debt load and a total hit to equity (as with CCL).

 

RCL, by a hanging thread IMO.

 

 

Edited May 12, 2022 by At Sea At Peace

[At Sea At Peace]

On 5/12/2022 at 5:31 PM, At Sea At Peace said:

 

I'm into distressed debt.  🙄  Love the 'cycles and event driven opportunities also in the short-term for equities.

 

The major public cruise line debt 'structure' or 'portfolio' is very, very, very (yes 3 times) complex; with tiers stratified for senior unsecured (really secured by everything, however, not specifically sub-secured; i.e. by island, ship, port, etc.), ship or groups of ships, islands, port asset etc.  

 

It is really unique, and very complex.

 

An uncontrolled (i.e., NOT a pre-agreed upon plan or prepack) reorganization would be a */+-&^&$.

 

RCL appears to be between CCL (possibly 'too big to sail') and NCL (too small and too concentrated on North American based revenues).  CCL is so big the sub-parts could essentially be disembarked (i.e., sub-lines); but it is a nightmare if it unfolds unorganized.  NCL is so small it might be an easy target (MSC or foreign sovereign fund) but at less that the current debt load and a total hit to equity (as with CCL).

 

RCL, by a hanging thread IMO.

 

 

 

Between RCL, CCL and NCL, having noted the extended losses and continued 'push further out in time' estimated returns to 'cash positive' sailings and operations (not net income), all bringing on more and more ships, increasing supply and capacities, with a still leery cruising customer and lower demand, CCL is clearly the first to see it clearly that they don't have the liquidity to sustain 12-months, and that is with no further (or eventual) Covid negative impacts heading into the Fall and Winter.

 

CCL announces the pricing of another $1,000,000,000 in senior unsecured debt (don't be fooled by the use of the term 'unsecured' in that)  The stated rate is 10.5% (which gives a negative indication of the return to the high risk assessment of the limitation of the sale to qualified institutional investors).

 

https://www.carnivalcorp.com/news-releases/news-release-details/carnival-corporation-plc-announces-pricing-10-billion-senior

 

 

Carnival Corporation & plc Announces Pricing of $1.0 Billion Senior Unsecured Notes due 2030 to Refinance 2023 Maturities

 

MIAMI, May 18, 2022 /PRNewswire/ -- Carnival Corporation & plc (NYSE/LSE: CCL; NYSE: CUK) today announced that Carnival Corporation (the "Company") has priced the private offering of $1.0 billion aggregate principal amount of 10.5% senior unsecured notes due 2030 (the "Senior Unsecured Notes"). The offering of the Senior Unsecured Notes is expected to close on May 25, 2022, subject to customary closing conditions.

 

The Senior Unsecured Notes will pay interest semi-annually on June 1 and December 1 of each year, beginning on December 1, 2022, at a rate of 10.5% per year and are callable beginning June 1, 2025. The Senior Unsecured Notes will be unsecured and will mature on June 1, 2030.   

The Senior Unsecured Notes will be fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by Carnival plc and certain of the Company's and Carnival plc's subsidiaries that own or operate vessels and material intellectual property and that guarantee certain of the Company's other indebtedness, including its first-priority secured indebtedness and second-priority secured indebtedness.

 

The Company expects to use the net proceeds of the offering to make scheduled principal payments on debt during fiscal 2023 and for general corporate purposes, including, without limitation, making repayments of its indebtedness, the financing or refinancing of a portion of the purchase price, rental payments, costs and expenses related to certain of its current and future property, plant and equipment (including leased assets and vessels) and their maintenance, repair, replacement and improvements, as well as any other payments related to its vessels' ready-for-sea costs, in each case to the extent such amounts are not covered by the Company's existing and future export credit facilities.