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Royal Caribbean Group RCL

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Morningstar’s Analysis

Valuation
Currency in USD
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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Stewardship

PREMIUM

Royal Caribbean Operation Largely Paused With No End to COVID-19 in Sight Yet; Shares Fairly Valued

Jaime M. Katz, CFA Senior Equity Analyst

Analyst Note

| Jaime M. Katz, CFA |

No-moat Royal Caribbean posted an adjusted net loss of $1.3 billion in its second quarter, as it digested costs with no related revenue from sailings in the period. The positive news is that costs continue to temper, and adjusting for Silversea’s one-quarter lag, net cruise cost declined nearly 60% sequentially. The demand picture painted implies travelers view the current pandemic as transitory, with bookings doubling the average levels experienced during the first eight weeks of the global cruise suspension. Management noted that more than 60% of the bookings received since mid-May have been new bookings, also indicating reservations taken are not as a result of just canceled sailings and future cruise credit application. Furthermore, the pricing picture remains solid, with 2021’s rate flat when including the pressure of bookings made with future cruise credits. In this vein, we don’t plan to materially alter our $52 fair value estimate, although we could modify the components of our estimate, including higher yield and lower capacity growth (due to shipyard delays) and capital expenditures.

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Company Profile

Business Description

Royal Caribbean is the world's second- largest cruise company, operating more than 60 ships across six global and partner brands in the cruise vacation industry. Brands the company operates include Royal Caribbean International, Celebrity Cruises, Azamara Club Cruises, and Silversea. The company also has a 50% investment in a joint venture that operates TUI Cruises, allowing it to compete on the basis of innovation, quality of ships and service, variety of itineraries, choice of destinations, and price.

Contact
1050 Caribbean Way
Miami, FL, 33132, Liberia
T +1 305 539-6000
Sector Consumer Cyclical
Industry Travel Services
Most Recent Earnings Jun 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type
Employees 85,400

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