Royal Caribbean Group (NYSE:RCL) reported earnings this morning, and the news was not good. For the third pandemic-plagued quarter in a row, the cruise line’s net loss was bigger than $1 billion — $1.3 billion this time, or $6.29 per share. Perhaps even more shocking, Royal Caribbean reported negative revenue for the quarter, as a lack of cruising and refunds demanded by customers rolled back revenue to negative $33.7 million.
Despite this news, Royal Caribbean stock recovered from an initial sell-off to turn positive in midmorning trading. At 1:50 p.m. EDT today, the stock is exactly where it closed yesterday, and Royal Caribbean’s peers are doing even better: Carnival (NYSE:CCL) and Norwegian Cruise Line Holdings (NASDAQ:NCLH) are up 3.8%.
Why investors’ curiously sunny disposition in the face of Royal Caribbean’s grim news? There was at least a little good news to report. The cruise line reminded investors that it resumed limited cruise operations outside the U.S. in July with three vessels from TUI and two vessels from Hapag-Lloyd, and in September (for a limited period) with one Silversea ship. It added that it has received permission from Singapore to resume cruising out of its ports, and said its Quantum of the Seas will begin doing just that in December.
In the U.S., meanwhile, the plan is still to restart its global cruise operation in a phased manner.
Management further confirmed that, as first announced two weeks ago, it is still burning cash at the rate of $250 million to $290 million per month. That’s not good news, but at least it hasn’t gotten any worse. And with liquidity of approximately $3.7 billion, this means that Royal Caribbean theoretically has enough cash to survive for at least another year before needing to raise additional capital.
With any luck, it won’t take that long for Royal Caribbean to resume cruising, and begin generating revenue to offset its costs without having to raise additional capital. As management noted, bookings for cruises scheduled for the first half of 2021, at least, appear to be “within historical ranges,” and prices are down only slightly year over year.
That should be good news for Carnival and Norwegian Cruise also, which would explain why all three stocks appear to be enjoying something of a lift today.