Why Royal Caribbean Stock Fell 13% in October

What happened

Royal Caribbean (NYSE:RCL) shareholders trailed a declining market in October as the stock dropped 13% compared to the S&P 500‘s 2.8% drop, according to data provided by S&P Global Market Intelligence.

That rally only erased a portion of the cruise ship giant’s broader losses, though, and the stock is down by more than 50% in 2020.

A cruise ship is docked near an island port.

Image source: Getty Images.

So what

Royal Caribbean’s business continued to sit in limbo last month, with almost its entire fleet unable to sail due to COVID-19 restrictions. That situation, which has stretched on since mid-March, is taking a major toll on its finances. Third-quarter losses landed at $1.3 billion, management revealed on Oct. 29, and Royal Caribbean is burning through $250 million to $290 million each month.

Now what

It isn’t yet clear when Royal Caribbean and its peers will be cleared to resume sailings, and that restart will likely scale up over many months. That’s why management has remained active on the capital front, including by issuing new debt and additional stock in October.

These cash raises will allow Royal Caribbean to endure many more months of limited services. But they’ll pressure earnings for long after the COVID-19 threat passes.

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