With persistently high energy costs and reduced consumer spending, Royal Caribbean Cruises (RLC) should follow the same direction as Carnival (CCA) and ask existing and potential shareholders for more money to reduce debt.
Carnival announcement a $1 billion stock sale to boost revenue last week, marking the second capital increase since May. Amid ongoing challenges related to the Covid-19 pandemic, record inflation and higher fuel costs, Royal Caribbean is also likely to implement the fundraising strategy.
What is a capital increase?
When a company approaches current or potential investors for additional capital in the form of debt or equity, it is called a “capital raise”.
Due to stock dilution and diminishing ownership per share, increases in total share capital will often discourage current shareholders. Following the announcement of Carnival’s capital increase on July 20, the share price fell about 12.5% in early trading.
RCL Outlook: 2023 does not look any better
In an interview with Capital.com, Edward Moya, senior market analyst at OANDA in New York, said, “Carnival was just the first domino to fall, and Royal Caribbean will also need a capital raise to stay afloat.”
“Cruise ship stocks are in trouble,” he warned. “The consumer is much weaker and the outlook for recession will cripple demand in 2023.”
Royal Caribbean (RLC) price table
Over the past five days, Royal Caribbean is down 8.47%, while slipping 17.09% below the red line in the past month and 57.70% in the past three months. Year-to-date, the stock price has fallen 56.72% and 58.69% over the past year.
As of 2 p.m. EDT, the stock price was about 3.28% lower at $33.29.
Carnival (CCA) price table
Over the past five days, Carnival has fallen 17.13%, while falling 16.89% in the past month and 50.94% in the past three months. Year-to-date, the stock price is 57.33% below the red line and 62.35% over the past year.
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As of 2:05 p.m. EDT, the stock price was down about 6.37% at $8.60.
Norwegian Cruise (NCLH) price table
In other travel stocks, Norwegian Cruise Line (NCLH) is down about 3.68% at $11.39 on Tuesday, after falling 42.63% in the past three months and 45.18% year-to-date.