In ordinary times, you can count on cruise lines to turn a profit. But, alas, these times are anything but ordinary, and as cruise ships lay dormant in ports around the world, a rethink is in order just to ensure survival.<\/p>\n
That said, according to Wedbush analyst James Hardiman, Royal Caribbean (RCL) has enough liquidity available to see it through to February 2021 based on \"an industry shutdown scenario.<\/p>\n
How does Hardiman arrive at such a conclusion? With operations shuttered, Royal Caribbean recently said that its monthly cash burn rate is between $150-$170 million. But with the addition of further outlays such as hedging costs and debt service expenses, the figure increases to between $250-$275 million a month.<\/p>\n
In the meantime, the company has secured a $3.3 billion loan through a private offering of senior secured notes. After paying back loans amounting to $2.35 billion, Hardiman estimates RCL will have $1 billion left, giving the company what we estimate would be pro-forma liquidity of ~$3.4B.<\/p>\n
Hardiman adds to the mix another $20-$50 million of monthly cash outflows. Where does this leave Royal Caribbean?<\/p>\n
Relative to the $3.4B of liquidity (with a $300M covenant-mandated floor), Hardiman says, This comes out to about 10 months of available liquidity on hand, which gets us into February of next year in a minimal revenue environment.<\/p>\n
However, even in a worst-case scenario, Hardiman doesnt foresee RCL requiring a lifeboat, as it has further options.<\/p>\n
The analyst concluded, \"It remains to be seen whether or not RCL will be cash flow positive by early 2021, and yet we can appreciate what appears to be a hesitation to follow in the footsteps of both CCL and NCLH in significantly diluting shareholders by way of an equity offering. Such an offering nonetheless remains a viable option for the company, and so we have minimal concern that the company would actually run out of liquidity.\"<\/p>\n
Accordingly, Hardiman keeps an Outperform rating along with a $63 price target. The implication for investors? Potential upside of 44% from current levels. (To watch Hardimans track record, click here)<\/p>\n
All in all, the rest of the Streets outlook for the struggling cruise line is a mixed bag. A Moderate Buy consensus rating is based on 5 Buys, 6 Holds and 1 Sell. However, the bulls are at the helm, as the average price target comes in at $67.80 and implies potential upside of 55%. (See Royal Caribbean's stock analysis at TipRanks)<\/p>\n
To find good ideas for stocks trading at attractive valuations, visit TipRanks Best Stocks to Buy, a newly launched tool that unites all of TipRanks equity insights.<\/p>\n
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Royal Caribbean Can Make It Through to 2021, but Whats Next? - Yahoo Finance<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" In ordinary times, you can count on cruise lines to turn a profit. But, alas, these times are anything but ordinary, and as cruise ships lay dormant in ports around the world, a rethink is in order just to ensure survival Continue reading