Is Now The Time To Buy Royal Caribbean Stock?

Royal Caribbean Cruises Ltd RCL shares are up 15.6% in the last week as investors overlook abysmal fourth-quarter earnings numbers and instead focused on bullish longer-term commentary.

What Happened: On Monday, Royal Caribbean reported that it lost $1.4 billion in the fourth quarter. For the full year 2020, Royal Caribbean reported a $5.8-billion net loss and $2.21 billion in revenue, down 79.8% from a year ago.

Related Link: The Pros And Cons Of Investing In Cruise Stocks Right Now

The company followed up the earnings report with news is it raising another $1 billion in cash via a secondary offering. At the company’s current cash burn rate of around $500 million per month, that $1 billion will buy Royal Caribbean another two months of operation.

The good news is that management said the company has "seen a 30% increase in new bookings since the beginning of the year when compared to November and December."

That commentary appears good enough for investors betting the cruise business will bounce back in a big way in the second half of 2021.

Why One Royal Caribbean Analyst Is Skeptical: Dispute the bullish move in the stock, analysts remain skeptical.

BofA Securities analyst Andrew Didora said this week that investors don’t seem to fully appreciate how much long-term damage has already been done to Royal Caribbean’s balance sheet.

“Longer term we see risk of demand impairment as a result of the outbreak and forecast a long tail for net yields to return to the prior peak, which will likely continue to put further pressure on the balance sheet,” Didora wrote.

BofA has an Underperform rating and $65 target for Royal Caribbean.

RCL Price Action: Royal Caribbean shares were down 0.35% at $91.31 at last check Friday. 

Benzinga’s Take: Royal Caribbean shares up at least 218% since the March 2020 market low, which is a huge run for a business that is still completely dead in the water until at least May.

The ultimate fate of the industry will be determined by how long it takes the leisure travel business to recover and whether the pandemic has permanently changed consumer demand.