2 Cruise Ship Stocks That Should Be Avoided at All Costs

NYSE: RCL | Royal Caribbean Group News, Ratings, and Charts

RCL – The cruise ship industry suffered huge losses amid the pandemic. Moreover, surging inflation and the Fed’s aggressive rate hikes seem to be weighing on cruise ship stocks. Hence, it might be best to avoid fundamentally bleak stocks, Royal Caribbean (RCL) and Carnival Corporation (CCL) now. Read on….

Cruise tourism took a setback due to the pandemic, which resulted in a massive loss of revenue. However, the demand slowly ticked up as the U.S. Center for Disease Control lifted its Covid-19 guidelines for cruise ships. But the cruise companies are in troubled waters again due to surging inflation, the Fed’s aggressive rate hike campaign, and a slowing economy. “There’s a lot of one step forward, one step back going on,” said Truist analyst Patrick Scholes

Moreover, shares of major cruise companies plummeted after the Fed announced its third consecutive 75-basis point rate hike last week, raising worries about their ability to pay off hefty debts and recover amid the economic turmoil. According to Truist, RCL holds $25 billion in debt while CCL owes $35 billion as of September 1.

Amid this backdrop, it could be wise to avoid cruise stocks Royal Caribbean Cruises Ltd. (RCL - Get Rating) and Carnival Corporation & plc (CCL - Get Rating), given their poor fundamentals.

Royal Caribbean Cruises Ltd. (RCL - Get Rating)

RCL, the world’s second-largest cruise vacation company, operates cruises under the Royal Caribbean International, Celebrity Cruises, Azamara, and Silversea Cruises brands worldwide. 

For the fiscal quarter ended June 2022, RCL’s operating loss came in at $218.64 million. Net loss and loss per share came in at $521.58 million and $2.05 as compared to $1.35 billion and $5.29 in the year-ago period.

The consensus EPS estimate for the ongoing fiscal year came in at a negative $6.93. RCL missed the EPS estimates in three of the trailing four quarters.

In terms of its forward EV/Sales, RCL is currently trading at 3.71x, 262.1% higher than the industry average of 1.02x. Its forward EV/EBITDA multiple of 39.90 is 389.6% higher than the industry average of 8.15.

The stock has declined 50.5% over the past year to close the last trading session at $45.76.

RCL’s POWR Ratings reflect this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

RCL also has a Stability grade of F and a Value, Sentiment, and Quality grade of D. In the 4-stock F-rated Travel – Cruises industry, it is ranked #3.

Click here to see the additional POWR Ratings for RCL (Momentum and Growth).

Carnival Corporation & plc (CCL - Get Rating)

CCL, a leader in contemporary cruising, operates as a leisure travel company in the United States and internationally. Its ships visit port calls under the brand names Carnival Cruise Line, Princess Cruises, Holland America Line, P&O Cruises (Australia), Seabourn, Costa Cruises, AIDA Cruises, P&O Cruises (UK), and Cunard.

The company also provides port destinations and other services, as well as owns and operates hotels, lodges, glass-domed railcars, and motor coaches.

Last month, CCL’s Princess cruises canceled 11 sailings aboard the Diamond Princess due to staffing issues that have been consistent across the cruise industry this year. According to the company, the brand faced “labor challenges” as travelers flocked back to cruises, and its ships resumed sailing with increased occupancy.

For the second quarter ended May 31, 2022, CCL’s operating loss came in at $1.47 billion. The company reported a net loss of $1.83 billion, while its loss per share amounted to $1.61.

CCL’s EPS is expected to come in at a negative $0.29 in the quarter ending November 2022.

CCL’s forward Price/Sales multiple of 0.85 is 6.8% higher than the industry average of 0.80. In terms of its forward EV/Sales, the stock is trading at 2.98x, 190.8% higher than the industry average of 1.02x.

The stock has declined 65.1% over the past year and 54.2% year-to-date to close the last trading session at $9.22.

CCL’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. CCL also has an F grade for Stability and Sentiment and a D for Value and Quality. In the same industry, it is ranked #2.

In addition to the POWR Rating grades we’ve stated above, you can see CCL ratings for Growth and Momentum here.

Want More Great Investing Ideas?

3 Stocks to DOUBLE This Year


RCL shares were trading at $47.20 per share on Wednesday morning, up $1.44 (+3.15%). Year-to-date, RCL has declined -38.62%, versus a -22.53% rise in the benchmark S&P 500 index during the same period.


About the Author: Komal Bhattar


Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
RCLGet RatingGet RatingGet Rating
CCLGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


Why is Stock Market Outlook So Uncertain?

The S&P 500 (SPY) has quickly pushed back from the highs and once again on the verge of a break below the 100 day moving average. Why is this happening? And what comes next? 40 year investment veteran Steve Reitmeister shares his view and top stocks in the commentary that follows...

3 Under-the-Radar Tech Stocks Quietly Powering the Digital Revolution

The technology industry's future seems promising, owing to increasing investments and rising worldwide demand for better products. Hence, investing in fundamentally stable tech stocks, Motorola (MSI), Power Integrations (POWI), and CI&T (CINT) could be the move for investors looking to capitalize on the sector's growth. Read on…

3 AI-Powered Drug Discovery Stocks Revolutionizing Medicine

The pharmaceutical industry is evolving continuously with the advancements in drug discovery with Artificial Intelligence (AI), propelling the industry’s growth. Amid this backdrop, quality medical stocks Pfizer (PFE), AstraZeneca (AZN), and Novartis (NVS), which are transforming medicine with AI-powered drug discovery, could be ideal portfolio additions. Continue reading...

3 Metaverse Stocks Building the Virtual Economy

The metaverse isn’t just a futuristic fantasy; it’s shaping up to be the next big digital economy. As digital spaces evolve into thriving marketplaces, companies like Apple (AAPL), NVIDIA Corp. (NVDA), and Meta Platforms (META) are building the foundation for this new era. Thus, investing in them could be rewarding. Read more…

Trump or the Fed More Important to Stock Investors?

The S&P 500 (SPY) is flirting with new highs once again. But it is not very clear what is driving these stock price gains. That is why Steve Reitmeister shares his latest views including a market outlook, trading plan and top picks to stay on the right side of the action.

Read More Stories

More Royal Caribbean Group (RCL) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All RCL News