Cruise ship operator Royal Caribbean (NYSE:RCL) stock has been recovering since its pandemic lows powered by pent-up demand. The acceleration of COVID vaccinations is bolstering bookings for 2022. The cruise line reported that 92% of the people on board its ships in July are vaccinated, with the exception of Singapore. The Company requires 100% of its crew to be fully vaccinated. The Company has stated that its guests are eager to resume cruising as it sees a steady increase in non-cruisers. The Company admits the third and fourth quarter of 2021 will “continue to be painful”, but they expect a return to normal by spring and summer 2022. Customer deposits have grown 30% sequentially to $2.4 billion. The Company closed the quarter with $5 billion in liquidity after having raised $13 billion since March of 2020. Patient investors seeking exposure in this epicenter recovery play can watch for opportunistic pullbacks in shares of Royal Caribbean.
Q2 2021 Earnings Release
On Aug. 4, 2021, Royal Caribbean released its second-quarter earnings for the quarter ending June 2021. The Company reported an EPS loss of (-$5.06), missing consensus analyst estimates for a loss of (-$4.38) by (-$0.68). Revenues fell (-71%) year-over-year (YoY) to $50.91 million versus consensus analyst estimates for $140.36 million. A total of 36 ships from the Company’s five brands or 60% of its fleet capacity have resumed sailing or intend to sail. The Company expects to have 80% of its capacity in service by year-end. Book load factor for 2022 is within historical ranges with prices for 2022 up versus the record-setting 2019. Customer deposits have increased $530 million to $2.4 billion since last quarter. Royal Caribbean CEO Richard Fain commented:
“We're thrilled to be back on the water at an accelerated speed in the US and elsewhere. After 16 months of being at a virtual standstill and another painful financial result this quarter, the flywheel is clearly picking up momentum. Since the pandemic began, our objective has been to make our ships safer than Main Street, and today, we are proving that an ambitious goal is achievable. We are also encouraged by the booking outlook especially for 2022 and beyond."
Conference Call Takeaways
CEO Fain set the tone:
“Today, we are reporting another painful set of financial results, but we're also reporting on the dramatic progress on the restarting of our operations and the continued strength in the demand environment for our leading brands. Most importantly, we have already restarted almost half of our capacity, and we're bringing more online as we speak. Our protocols appear to be working very well, which gives us and our guests comfort about their safety on board. Lastly, bookings are remarkably strong, especially for 2022.”
He continued:
“I would like to address these 3 issues in order. First, I want to talk about the process of restarting; second, our operational protocols and their impact; and then lastly, come back to our booking outlook. Now starting with the process of resuming operations. It seems like only yesterday that people were asking me if I thought cruising would restart by December. Suddenly, we have half of our ship sailing on revenue cruises. We know that it's going to take us a while to return to full normalcy. But while people are emerging from isolation, it's clearly going to take them a while to feel totally comfortable. We believe that the best way to get them comfortable is to demonstrate just how well the process works. We call that the flywheel effect. Once we get the vast majority of our fleet back online and thousands of people sailing safely, it will make even more people feel comfortable doing the same thing. Once the flywheel starts spinning, it keeps spinning and the machinery keeps getting more powerful. Now some of you have asked why we were the first to restart in the States and how we've gotten our ships operating so quickly. The answer is simply that we started earlier, and we have the very best people in the business who have been very aggressive in implementing the new protocols. We started preparing before we had official word that we would be allowed to sail but at the point where we thought the approval was inevitable. And our people have worked hard and diligently to make sure that our ships could be back in the water quickly. Also, thanks in large part to the vaccine rollout, society has been progressing faster towards normalcy, which has maximized the pace of our recovery.”
Delta Variant and Demand
CEO Fain addressed the impact of the COVID Delta variant:
“Now the Delta variant is problematic for everyone, but even this looks manageable by our extensive protocols. It's too early to draw definitive conclusions, but vaccines are the ultimate weapon, and they work. Our experience shows that while there are breakthrough cases aboard, the vaccines help keep them contained. In fact, and I thought this was quite unusual, in most of our positive cases, even the cabin mate of the infected individual has tested negative. But in light of the Delta variant and other variants, we have recently strengthened our protocols further, even more testing and even more people required to be vaccinated than we had in June and July. We have gone from cruises being a source of concern to cruises being an exemplar for how to deal with COVID-19. I'm thrilled that we're making this dream a reality. And that brings us to how our customers are responding. And fortunately, that outlook is good. Our guests are eager to cruise again. We had hoped that there would be pent-up demand for cruises, but even we were surprised by the level that we're seeing. We are also encouraged by the improvements we're seeing more broadly across the travel industry. Cruise consideration remains high among active cruisers and is steadily increasing among non-cruisers. It is clear people are eager to travel to take a vacation, and we are ready to make their vacation dreams come true. Jason is going to speak more about our booking trends in a moment.”
RCL Opportunistic Pullback Price Levels
Using the rifle charts on the weekly and daily time frames provides a near-term view of the landscape for RCL stock. The weekly rifle chart uptrend is starting to slow as shares pull back towards the rising 5-period moving average (MA) near the $87.85 Fibonacci (fib) level. The weekly 15-period MA is rising at $82.01. The weekly stochastic has a mini pup with upper weekly Bollinger Bands (BBs) at $99.91. The weekly market structure low (MSL) buy triggered above $82.12, which is a key support level. The daily rifle chart uptrend is fading with the falling 5-period MA at $89.73 attempting to crossover down through the 15-period MA at $89.00. The selling pressure is powered by the stochastic mini inverse pup falling under the 60-band with daily lower BBs at $78.01. Prudent investors can watch for opportunistic pullbacks levels at the $85.21 fib, $83.51 fib, $82.12 weekly MSL trigger, $79.41 fib, and the $76.26 fib level. The upside trajectories range from the $96.24 fib upwards to the $108.70 fib level.