10 Worst Cruise Stocks to Buy Now According to Short Sellers

4) Royal Caribbean Cruises Ltd. (NYSE:RCL)

Short % of Float (As of 15 August): 8.78%

Number of Hedge Fund Holders: 48

Royal Caribbean Cruises Ltd. (NYSE:RCL) operates as a global cruise company. It operates through brands that mainly serve the contemporary, premium, and deluxe segments of the cruise vacation industry.

Short sellers believe that the company’s valuations have outpaced its fundamentals, as Royal Caribbean Cruises Ltd. (NYSE:RCL)’s stock trades at ~11.99x its forward earnings, while the sectoral average remains at ~7.75x. Another issue that might impact the company’s margins in 2H 2024 is its debt burden and the resulting interest expenses. As of the end of 2Q 2024, its long-term debt sat at over ~19 billion. Apart from this, it has long-term operating lease liabilities and other long-term liabilities of $591 million and $522 million, respectively. For FY 2024, Royal Caribbean Cruises Ltd. (NYSE:RCL) expects its NCC (Net Cruise Costs), excluding Fuel, per APCD to increase approximately 6.0% in constant currency and as-reported.

Wall Street analysts believe that Royal Caribbean Cruises Ltd. (NYSE:RCL)’s stock is well-placed to see strong growth in 2H 2024 as optimized occupancy and productivity initiatives should keep a check on the company’s costs over the long term. Also, consumer interest in travel maintained momentum for Royal Caribbean Cruises Ltd. (NYSE:RCL) in 2024, continuing the healthy demand and strong pricing trends in the business.

The redeployment of the fleet was wrapped up in mid-2022, with occupancy returning to historical levels. These factors led to the normalization of profits and cash flow. Royal Caribbean Cruises Ltd. (NYSE:RCL) saw record pricing in 2023 (13% above its 2019 level), with further growth anticipated moving forward, given strong booking patterns and price levels as a result of a healthy consumer appetite.

Analysts at UBS Group increased their target price on the shares of Royal Caribbean Cruises Ltd. (NYSE:RCL) from $168.00 to $183.00, giving it a “Buy” rating on 31^st July. Notably, 48 hedge funds held stakes in the company.

Ariel Investments, an investment management company, released its second-quarter 2024 investor letter. Here is what the fund said:

“Global cruise vacation company, Royal Caribbean Cruises Ltd. (NYSE:RCL), advanced on another quarterly earnings beat and subsequent raise in full-year guidance. Stronger than anticipated consumer demand, healthy onboard spend, robust pricing and solid cost containment lifted recent results. Additionally, RCL is benefitting from several new megaships, more island destinations and re-entry into the China market. The resiliency of the core cruise consumer, in combination with management’s superior operational expertise and revised earnings outlook, lays the foundation for RCL to exceed its three-year strategic imperative, the Trifecta Program, a year earlier than expected.”