Is Royal Caribbean Group a winning stock in the travel services industry? By StockNews
© Reuters. Is Royal Caribbean Group a winning stock in the travel services industry?
Shares of cruise operator Royal Caribbean (RCL) surged last week after Pfizer shared positive results for its COVID-19 oral antiviral treatment candidate, which was shown to reduce the risk of hospitalization or death by 89%. However, the stock has fallen 8.2% over the past five days. Also, given that RCL is currently trading at a high valuation, is it worth betting on the stock now? Read on.The second largest cruise line in the world, Royal Caribbean Cruises Ltd. (NYSE:), based in Miami, Florida, owns three global cruise brands, including Royal Caribbean International, Celebrity Cruises and Silversea Cruises. Its brands operate around 58 vessels with 15 more on order. Its stock has gained 20.4% in price over the past year and 18.8% since the start of the year to close yesterday’s trading session at $86.30. However, the shares are currently trading below their 50-day moving average. And over the past five days, RCL has fallen 8.2%.
The company suffered massive losses last year due to pandemic-related travel restrictions. But recently announced positive data from Pfizer Inc. (NYSE:) for its COVID-19 oral antiviral treatment candidate, which has been shown to reduce the risk of hospitalization or death by 89%, has boosted investor optimism. about the recovery of the cruise industry. RCL shares rose after the press release. Moreover, if the breakthrough drug reduces the number of deaths, travel demand should rebound and allow cruise lines, including RCL, to turn the tide.
The business expects to generate positive cash flow by spring and be profitable for the full year of 2022. However, operational challenges persist and demand rebound is uncertain as the possibility of emerging new variants of the virus cannot be ruled out. In addition, the commercialization of the Pfizer drug is expected to take some time. Furthermore, RCL looks significantly overvalued at its current price level given its underlying fundamentals and with a beta of 2.62 the stock looks very volatile.
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