Is Now The Time To Buy RCL Stock?

[NorCalCruiseGuy]

The shareholder benefits of owning 100 shares of RCL stock have been covered in many posts here. Take a look at the share price today. This could be a good time to buy.

[Coco Creek]

In a word, no. RCL has serious debt problems which have reduced their debt to junk status. Further, pocket books are starting to to feel the squeeze as a recession develops and it is going to be tough to fill capacity with the Solstice and Genesis class ships coming to market.

 

A stock should only be purchased if it is a sound economic investment, not simply to get a small cruise credit.

[YOW]

Thank you, Coco Creek. I've sometimes been uncomfortable with the 'advice' given by certain members here to purchase stock for purposes of getting the credit. These shareholder benefits can be wiped out in a single day of trading. While I think this is an appropriate forum to exchange information on the companies and their products, one has to take the 'buy' advice with a grain of salt, as it often comes from someone who already owns shares himself/herself.

[ECCruise]

Plus, it must be considered that the OBC for stock ownership runs only year-to-year. The bean counters could nix it if they so chose.

[Coco Creek]

http://moneycentral.msn.com/investor/research/wizards/srwfund.asp?Symbol=RCL

 

The link will take you to a research wizard that evaluates RCL from all angles. I am particularly concerned with a debt/equity ratio of only .86.

 

If you really want to invest in the cruise industry, Carnival offers a much bigger upside potential at this point in time.

[Desertbelle]

....

A stock should only be purchased if it is a sound economic investment, not simply to get a small cruise credit.

 

I disagree. I think it really depends on what your personal financial situation is as well as your cruising schedule.

 

If buying $3000 of RCL stock (or whatever the current price for 100 shares of RCL is going) isn't a lot of money to you and you cruise on RCL company ships multiple times a year, it would pay for itself in just a few years and you would still have the stock left in the end, no matter what condition it's in at that point.

 

If, on the other hand you have little money to use for future savings for retirement, and you only cruise once a year or so, it may not be the right stock for you to purchase. But, I can't see how even in that circumstance it would be a horrible stock to purchase.

 

For us, we had some extra money to put into buying RCL stock and we cruise 2-3 times a year on average, almost always on RCL company ships, so that's $400-600 a year we get back from RCL. I think that's a hell of a good dividend....can't recall that any of our other stocks/investments give us anyway near that much return.:)

[Gonzo70]

I think it is a terrible time to purchase the stock. Fuel costs continue to skyrocket and only so much can be passed on to consumers before they look elsewhere to vacation or spend less money onboard. The high fuel cost also greatly increases their food cost. The higher airfares make it harder for people not living near a cruise port to travel to a cruise port.

 

They just had a bad quarter and the remaining '08 quarters likely will be bad as well. If fuel costs don't stabilize the quarters could be horrendous and it may then carry into '09 and beyond. Another problem is most anlaysts covering the stock currently have buy or strong buy ratings meaning there likely will be a slew of analyst downgrades coming which will further pressure the stock. RCL is a growth stock that is seeing its growth significantly falter with no end in sight. A final caution is that the shareholder benefit, while a nice perk for frequent cruisers, can be altered (i.e. made so it cannot be combined with other types of OBC) or discontinued at any time.

 

My two cents. :cool:

[Gonzo70]

 

If buying $3000 of RCL stock (or whatever the current price for 100 shares of RCL is going) isn't a lot of money to you and you cruise on RCL company ships multiple times a year, it would pay for itself in just a few years and you would still have the stock left in the end, no matter what condition it's in at that point.

 

But what if you pruchase it with this intent, the stock drops another 25% short term, and they discontinue the shareholder benefit shortly after your purchase. Just because you plan to cruise a lot in the future does not mean that it is a good idea to buy this stock; that would only be true if the shareholder benefit was guaranteed to not only remain active, but also guaranteed to not be altered so that it is less useful.

[hermang]

I disagree. I think it really depends on what your personal financial situation is as well as your cruising schedule.

 

If buying $3000 of RCL stock (or whatever the current price for 100 shares of RCL is going) isn't a lot of money to you and you cruise on RCL company ships multiple times a year, it would pay for itself in just a few years and you would still have the stock left in the end, no matter what condition it's in at that point.

 

If, on the other hand you have little money to use for future savings for retirement, and you only cruise once a year or so, it may not be the right stock for you to purchase. But, I can't see how even in that circumstance it would be a horrible stock to purchase.

 

For us, we had some extra money to put into buying RCL stock and we cruise 2-3 times a year on average, almost always on RCL company ships, so that's $400-600 a year we get back from RCL. I think that's a hell of a good dividend....can't recall that any of our other stocks/investments give us anyway near that much return.:)

 

Purchased yyears ago at around 20 and it was whatas high as 45. Remember about 17% of the population has ever cruised which means growth year to year should be decent. Frekin economists and analysts think everytime Carnival sneezes the cruise industry is in the toilet. Rcl is a well run company - look at revenue - profit is important but it does NOT have to be every quarter - NO ONE is that good

[billsgal]

Most of those who suggest purchasing the stock to gain a cruise credit, are regular cruisers on RCI or Celebrity and are talking about using discretionary funds that will not affect someone's financial security. Anyone looking for good solid financial advice is looking in the wrong place if they are looking here. No one can accurately predict what the stock market will do, especially in these times of great volatility and trying to time the market is especially risky. If the loss of $3,000 or so will cause you a financial hardship, you would be well advised not to purchase this or any other stock without seeking the advice of a good financial advisor. If, on the other hand, you can afford the risk involved in such a purchase and expect to be a frequent cruiser on these lines, you might want to consider it. Expecting that the company will suddenly discontinue a stock benefit that costs it very little and probably generates more revenue than an equivalent payout in advertising money, is a bit too negative for my thinking. Clearly it is possible, but IMHO highly unlikely. :rolleyes:

[omeinv]

There is nothing wrong with buying the stock strictly for the credit, as long as the buyer understands what they're getting into.

 

Someone buying for the credit has fairly easy math to do:

 

14 nights aboard generates $250.00 in credit. Assuming a person uses automatic gratuities, this is something less than the amount needed to pay those, so the credit has a very "real" cash benefit (as opposed to some sort of credit not everyone would use).

 

The stock today is at $31.00 per share, which is low historically. As the previous poster pointed out, there is no telling where it will go. Particularly now. I believe the drop in the last few days is in large part an anomaly caused by automated trading (automated systems are programmed to react to events, without applying logic to the events). For instance in this case the most recent drop (of about $1.50 per share) occurred when RCL beat earnings estimate for the quarter, yet announced reduced guidance for the rest off the year. Of course that reduced guidance was based almost solely on fuel prices. That sort of mixed message isn't something the systems adapt well to. All that being said, one could make a convincing case that the market generally is trending down, and will continue to do so for some time. In other words, the stock could go down or go up (very unique this RCL stock).

 

To determine if buying - for the shareholder benefit, and no other reason - makes sense, one simply divides cost of the stock by the number of weeks they would cruise on RCL, Azamara, or Celebrity WITH OR WITHOUT the benefit (if you restrict yourself to RCL Lines because of the benefit, you skew the numbers, but if you're willing to do so it's up to you).

 

With a stock price of $31.00 per share, it would take 25 weeks aboard to completely recover the cost of the stock, via the benefit. That cruiser (lucky person that he is) has eliminated ALL risk. If they complete that number of cruises, the stock could drop to ZERO, and the are still ahead. (for the inevitable nay-sayers, I will point out the shareholder benefit could be changed or eliminated at any time. So if RCL goes stops the credit, and their stock drops to ZERO, before you take the requisite number of cruises you lose).

 

For most of us, the realities make the pay-off fairly slowly. On the plus side, the stock is unlikely to drop to zero, and the benefit has existed for quite sometime, so apparently RCL figures it makes sense to continue it. The benefit is a good one, and there is NOTHING inherently wrong with owning shares strictly for the benefit. It just depends on a person's particular needs; and that is true for ANY investment or purchase.

 

Harris

Denver, CO

 

(Please note posts 4 through 10 were made while I wrote this, and they covered most of my points better than I did)

[hermang]

There is nothing wrong with buying the stock strictly for the credit, as long as the buyer understands what they're getting into.

 

Someone buying for the credit has fairly easy math to do:

 

14 nights aboard generates $250.00 in credit. Assuming a person uses automatic gratuities, this is something less than the amount needed to pay those, so the credit has a very "real" cash benefit (as opposed to some sort of credit not everyone would use).

 

The stock today is at $31.00 per share, which is low historically. As the previous poster pointed out, there is no telling where it will go. Particularly now. I believe the drop in the last few days is in large part an anomaly caused by automated trading (automated systems are programmed to react to events, without applying logic to the events). For instance in this case the most recent drop (of about $1.50 per share) occurred when RCL beat earnings estimate for the quarter, yet announced reduced guidance for the rest off the year. Of course that reduced guidance was based almost solely on fuel prices. That sort of mixed message isn't something the systems adapt well to. All that being said, one could make a convincing case that the market generally is trending down, and will continue to do so for some time. In other words, the stock could go down or go up (very unique this RCL stock).

 

To determine if buying - for the shareholder benefit, and no other reason - makes sense, one simply divides cost of the stock by the number of weeks they would cruise on RCL, Azamara, or Celebrity WITH OR WITHOUT the benefit (if you restrict yourself to RCL Lines because of the benefit, you skew the numbers, but if you're willing to do so it's up to you).

 

With a stock price of $31.00 per share, it would take 25 weeks aboard to completely recover the cost of the stock, via the benefit. That cruiser (lucky person that he is) has eliminated ALL risk. If they complete that number of cruises, the stock could drop to ZERO, and the are still ahead. (for the inevitable nay-sayers, I will point out the shareholder benefit could be changed or eliminated at any time. So if RCL goes stops the credit, and their stock drops to ZERO, before you take the requisite number of cruises you lose).

 

For most of us, the realities make the pay-off fairly slowly. On the plus side, the stock is unlikely to drop to zero, and the benefit has existed for quite sometime, so apparently RCL figures it makes sense to continue it. The benefit is a good one, and there is NOTHING inherently wrong with owning shares strictly for the benefit. It just depends on a person's particular needs; and that is true for ANY investment or purchase.

 

Harris

Denver, CO

 

(Please note posts 4 through 10 were made while I wrote this, and they covered most of my points better than I did)

 

I just read Q1 earnings report - sure don't sound like Junk Bond status to me

[ECCruise]

I just read Q1 earnings report - sure don't sound like Junk Bond status to me

 

You might not think it does, but Standard and Poors, which is who determines bond status, does.

[Gonzo70]

I just read Q1 earnings report - sure don't sound like Junk Bond status to me

 

And you are more qualified to determine this than Standard & Poors?

 

From Forbes.com: "Standard & Poor's docked Royal Caribbean Cruises' credit rating Thursday, saying boatloads of revelers won't offset high fuel prices.

Royal Caribbean Cruises (nyse: RCL - news - people )'s stock skimmed off 57 cents, or 1.6%, at $34.13, in afternoon trading Thursday. Shares of rival cruise operator Carnival (nyse: CCL - news - people ) also sank, losing 55 cents, or 1.3%, at $42.09.

Analyst Ben Bubeck pointed to Royal Caribbean's heavy fleet investment, financed in part by borrowing, and rising fuel costs as adding pressure to the company's metrics. The potential crunch comes at a time when growth may be difficult given the slowing U.S. economy.

Surprisingly, the cruise industry has kept an even keel despite consumers cutting back on spending amid rising fuel and food prices. Royal Caribbean reported stronger-than-expected bookings in 2007, which boosted sales by 17.6%, but it posted a 4.8% drop in net earnings resulting from increased fuel prices. In mid-February, the company affirmed its 2008 guidance for earnings of $3.20 to $3.40 a share, as forecast at the end of January. Analysts expect $3.22, below the midpoint of that range.

"While Royal Caribbean experienced some weakness in demand and pricing in early 2007, particularly in the Caribbean, performance during the second half of 2007 was solid, and the company met its full-year earnings guidance," Bubeck said. "Substantial increases in fuel costs were partially offset by cost-control initiatives, including hedging activity. Royal Caribbean also recently implemented a fuel supplement."

The downgrade sinks the company into junk-bond territory, but Bubeck said the rating outlook is stable.

"The rating on Royal Caribbean reflects an aggressive financial risk profile, the capital-intensive nature of the cruise industry, and the sensitivity of the travel and leisure sector to economic cycles," Bubeck said. "These factors are somewhat offset by Royal Caribbean's solid brands, a relatively young and high-quality fleet of ships, high barriers to entry in the cruise industry, and an experienced management team.'"

 

See: http://www.forbes.com/2008/04/03/royal-caribbean-cruises-markets-equity-cx_mp_0403markets30.html?partner=yahootix

[hermang]

And you are more qualified to determine this than Standard & Poors?

 

From Forbes.com: "Standard & Poor's docked Royal Caribbean Cruises' credit rating Thursday, saying boatloads of revelers won't offset high fuel prices.

Royal Caribbean Cruises (nyse: RCL - news - people )'s stock skimmed off 57 cents, or 1.6%, at $34.13, in afternoon trading Thursday. Shares of rival cruise operator Carnival (nyse: CCL - news - people ) also sank, losing 55 cents, or 1.3%, at $42.09.

Analyst Ben Bubeck pointed to Royal Caribbean's heavy fleet investment, financed in part by borrowing, and rising fuel costs as adding pressure to the company's metrics. The potential crunch comes at a time when growth may be difficult given the slowing U.S. economy.

Surprisingly, the cruise industry has kept an even keel despite consumers cutting back on spending amid rising fuel and food prices. Royal Caribbean reported stronger-than-expected bookings in 2007, which boosted sales by 17.6%, but it posted a 4.8% drop in net earnings resulting from increased fuel prices. In mid-February, the company affirmed its 2008 guidance for earnings of $3.20 to $3.40 a share, as forecast at the end of January. Analysts expect $3.22, below the midpoint of that range.

"While Royal Caribbean experienced some weakness in demand and pricing in early 2007, particularly in the Caribbean, performance during the second half of 2007 was solid, and the company met its full-year earnings guidance," Bubeck said. "Substantial increases in fuel costs were partially offset by cost-control initiatives, including hedging activity. Royal Caribbean also recently implemented a fuel supplement."

The downgrade sinks the company into junk-bond territory, but Bubeck said the rating outlook is stable.

"The rating on Royal Caribbean reflects an aggressive financial risk profile, the capital-intensive nature of the cruise industry, and the sensitivity of the travel and leisure sector to economic cycles," Bubeck said. "These factors are somewhat offset by Royal Caribbean's solid brands, a relatively young and high-quality fleet of ships, high barriers to entry in the cruise industry, and an experienced management team.'"

 

See: http://www.forbes.com/2008/04/03/royal-caribbean-cruises-markets-equity-cx_mp_0403markets30.html?partner=yahootix

 

I generally do better than the S&P indexes with my portfolio. Hey they make a living selling their opinions and so does UBS and the banks that got whupped by the sub prime market - how freakin smart were they???

 

If I listened to all the crap these analysts spewed my 401 k would be a 201k. (The rating on Royal Caribbean reflects an aggressive financial risk profile, the capital-intensive nature of the cruise industry, and the sensitivity of the travel and leisure sector to economic cycles," Bubeck said. "These factors are somewhat offset by Royal Caribbean's solid brands, a relatively young and high-quality fleet of ships, high barriers to entry in the cruise industry, and an experienced management team.) fancy words.

 

 

On paper mine is down - but funny thing I ain't panic selling and it is a paper loss.

 

OnYahoo 5 min ago US ship fires on an Iranian boat - and oil rises $2 a bbl - sounds like market spec to me. How many analysts have been caught pushing stocks so their companies can make a buck. I just don't trust the so called experts like S&P - Sorry

 

Alan Greenspan when he was head of the fed issues 2 words Irrational Exhuberance" and the market dived what 300 points?

 

If you can't aford to be in the market DONT be there

[ECCruise]

I generally do better than the S&P indexes with my portfolio. Hey they make a living selling their opinions and so does UBS and the banks that got whupped by the sub prime market - how freakin smart were they???

 

If I listened to all the crap these analysts spewed my 401 k would be a 201k. (The rating on Royal Caribbean reflects an aggressive financial risk profile, the capital-intensive nature of the cruise industry, and the sensitivity of the travel and leisure sector to economic cycles," Bubeck said. "These factors are somewhat offset by Royal Caribbean's solid brands, a relatively young and high-quality fleet of ships, high barriers to entry in the cruise industry, and an experienced management team.) fancy words.

 

 

On paper mine is down - but funny thing I ain't panic selling and it is a paper loss.

 

OnYahoo 5 min ago US ship fires on an Iranian boat - and oil rises $2 a bbl - sounds like market spec to me. How many analysts have been caught pushing stocks so their companies can make a buck. I just don't trust the so called experts like S&P - Sorry

 

Alan Greenspan when he was head of the fed issues 2 words Irrational Exhuberance" and the market dived what 300 points?

 

If you can't aford to be in the market DONT be there

 

Heavens, mate, S & P isn't an opinion service or an analyst. It is a BOND RATING AGENCY.

[Drew B]

With a stock price of $31.00 per share, it would take 25 weeks aboard to completely recover the cost of the stock, via the benefit. That cruiser (lucky person that he is) has eliminated ALL risk. If they complete that number of cruises, the stock could drop to ZERO, and the are still ahead. (for the inevitable nay-sayers, I will point out the shareholder benefit could be changed or eliminated at any time. So if RCL goes stops the credit, and their stock drops to ZERO, before you take the requisite number of cruises you lose).

 

 

A crucial element, here, is to consider whether this "lucky person" would otherwise spend 25 weeks (and the tens if not hundreds of thousands of dollars associated with that) aboard an RCCL/X ship. If so, it is a great plan. If not, then they are blowing a ton of cash to capitalize on a perk that in the end may cost them a great deal of money...

 

It's like if you see an item on sale for $10,000 off and you buy it, it could mean one of two things:

 

1. If you were going to buy this item anyway, YOU JUST SAVED $10,000! Congratulations!!!

 

2. If you wouldn't have otherwise bought this item, then you just SPENT God knows how much in order to "save" a hypothetical $10,000 you never would have spent in the first place...

[omeinv]

Excellent point which I tried to cover, but didn't stress. The shareholder benefit should first be looked at in light of one's purchases that would be made regardless of the benefit.

 

For us it works out very well, since we like Celebrity, and like cruising, so that's where our vacation dollars would go without the benefit. The benefit is a very easy decision for us. I only wish I'd known about it for the first two cruises, I took.

 

Following the stock has become something of a hobby for me, and if I were talking face-to-face with someone (rather than here on the internet) I would likely tell someone planning to take a 14 night cruise in the near future to grab the 100 shares of stock and get the benefit. The down side is that the stock could fall substantially in the time it had be held. My own opinion is that won't happen; but if my opinion was all that hot, I wouldn't be sitting at work typing this; I'd be cruising year round on my stock market windfalls. :)

 

Harris

Denver, CO

 

To determine if buying - for the shareholder benefit, and no other reason - makes sense, one simply divides cost of the stock by the number of weeks they would cruise on RCL, Azamara, or Celebrity WITH OR WITHOUT the benefit (if you restrict yourself to RCL Lines because of the benefit, you skew the numbers, but if you're willing to do so it's up to you).

[hermang]

Heavens, mate, S & P isn't an opinion service or an analyst. It is a BOND RATING AGENCY.

 

It is an assessment made by their analysts and economists based on cookie cutter parameters. Ivan Boesky sold junk bonds sure - but I deal with the fallout from these so called analysts and experts every day. One breath of the word junk bond and the stock dropped what at least 5 points. I personally don't believe that RCCL or Carnival is in junk bond status. Here is another - Cisco was a high flyer during the dot com boom. The company had virtually no debt and yet they were trashed because some analyst who "follows the communication industry" thought well Avaya is crap so everyone in the industry is as well.

 

My two cents - end of diatribe

[Andy]

Hi Everyone !

 

I do not have a buy/sell/hold opinion. However, it appears the Cruise industry may have some rough sailing ahead. With Oil at $120 per barrel, and a weakening world economy, this must have the Cruiselines concerned. I have said for some time, that I think late 2008 and into 2009 may prove to be the perfect storm for the Cruise industry. There are many new ships/berths coming online which will mean a great deal of competition. Add to this a weak economy, and out of control fuel prices, and it paints a tough picture for the industry.

 

Getting back to the shareholder benefit.... at today's price, it would cost you roughly $ 3,150 plus commission to buy 100 shares. If you calculate the benefit you would recieve with each sailing, and if you cruise a great deal, this may be worthwhile for you. With that said.... IMHO, I would NEVER buy a stock for a shareholder benefit. Also, as ECCruise said, this benefit is renewed by Royal Caribbean each year, and may come to an end.

 

Lastly, always seek the advice of an investment professional before you make any decisions. Good luck !

[Bobblsc]

The above poster may have been referring to the Standard and Poor's 500 stock index, often used to gauge a broader base of stock price movement than the Dow Jones industrial average, reflecting only 30 stocks. As you know there are also several other indexes.

 

RCL is probably a speculative buy now, but the price seems to be attractive if you can hold it for a year or more, probably more. The on board credit does soften a reduction of the stock price, should that occur after you purchase 100 shares.

 

As for bond rating agencies, S&P, Moodys, and Fitch, it has not been unusual for them to rate too high in recent years.

 

We should not berate our fellow posters.

 

Bob :rolleyes:

[Nakantia]

I've been told that you can't use the shareholder benefit on Carnival ships if you are receiving an onboard credit as part of your booking (you can't double-dip). Is this true with the Royal Caribbean shareholder benefits also?

[Desertbelle]

I've been told that you can't use the shareholder benefit on Carnival ships if you are receiving an onboard credit as part of your booking (you can't double-dip). Is this true with the Royal Caribbean shareholder benefits also?

 

On our last cruise on the Galaxy, we had $685 on board credit. $200 from a pre-booking, $200 from our stockholders benefit, $175 from our TA, and our $110 refund of our Fuel Supplement.

 

This isn't the first time we have had other on board credits used with our stock benefit.

[ECCruise]

I've been told that you can't use the shareholder benefit on Carnival ships if you are receiving an onboard credit as part of your booking (you can't double-dip). Is this true with the Royal Caribbean shareholder benefits also?

 

This is no longer the case on Carnival Corp. brands (a recent change). You can find info on the Carnival/Princess boards.

 

And yes, as the other poster said, you can double- and triple-dip the credits.

[Nakantia]

Thanks -- I'll check it out.