I've been a holder of
RCL
since 2021 and I'm happy with the stock. Still, today I sold my shares. Here's why:
First on the technicals: The stock ran 50% since its late October bottom without even a two-day correction. So, it's due for some of that. Also, @LonesomeTheBlue's terrific Trend Lines Pro tool identifies 2 competing rising trading channels on a 2-hour bar chart. It appears as if price were getting squeezed into a bearish wedge pattern, as traders attempt to keep the stock inside both of these channels. When wedges break they can give rise to explosive price moves, and given the overbought nature of the stock, I think it's more likely that the wedge will resolve to the downside.
Secondly, a similar, but mirrored effect is becoming visible on the Money Flow Index (MFI). Money Flow Index is basically a volume-adjusted RSI. Divergences between price and MFI have the same interpretation as those between price and RSI. So, the picture is not good: While price has reached a new YTD high, and is within striking distance of an ATH, MFI is breaking down to a new 6-week low.
On the fundamentals, While the price of the stock is still 10% below the ATH made at the end of 2019, market cap already exceeds that of 2019-12-31 by 10%, and enterprise value (EV) is ahead of that previous record by more than 25%. This is because Royal Caribbean was forced to issue a lot of shares and a lot of debt to bridge the cash flow drought during the COVID shutdown. The problem with this is that such EV demands an equally high EBITDA in order to arrive at a reasonable multiple.
The present multiple of EV to NTM EBITDA is 10.1x. That's roughly in line with the long-term average. However, embedded in this calculation is an expected NTM EBITDA of $5.1B, which is 40% more than TTM. Is that achievable? Well, tt would be a new record, but sure: As long as fuel prices stay low, the cruise industry doesn't get into another fight with Florida's hot-tempered governor, and there's no recession, no pandemic, and no hurricanes getting in the way of cruise ships.
I guess all I'm saying is that I see better risk/reward elsewhere. So, good-bye and good luck to all shareholders aboard $RCL.
RCL
since 2021 and I'm happy with the stock. Still, today I sold my shares. Here's why: First on the technicals: The stock ran 50% since its late October bottom without even a two-day correction. So, it's due for some of that. Also, @LonesomeTheBlue's terrific Trend Lines Pro tool identifies 2 competing rising trading channels on a 2-hour bar chart. It appears as if price were getting squeezed into a bearish wedge pattern, as traders attempt to keep the stock inside both of these channels. When wedges break they can give rise to explosive price moves, and given the overbought nature of the stock, I think it's more likely that the wedge will resolve to the downside.
Secondly, a similar, but mirrored effect is becoming visible on the Money Flow Index (MFI). Money Flow Index is basically a volume-adjusted RSI. Divergences between price and MFI have the same interpretation as those between price and RSI. So, the picture is not good: While price has reached a new YTD high, and is within striking distance of an ATH, MFI is breaking down to a new 6-week low.
On the fundamentals, While the price of the stock is still 10% below the ATH made at the end of 2019, market cap already exceeds that of 2019-12-31 by 10%, and enterprise value (EV) is ahead of that previous record by more than 25%. This is because Royal Caribbean was forced to issue a lot of shares and a lot of debt to bridge the cash flow drought during the COVID shutdown. The problem with this is that such EV demands an equally high EBITDA in order to arrive at a reasonable multiple.
The present multiple of EV to NTM EBITDA is 10.1x. That's roughly in line with the long-term average. However, embedded in this calculation is an expected NTM EBITDA of $5.1B, which is 40% more than TTM. Is that achievable? Well, tt would be a new record, but sure: As long as fuel prices stay low, the cruise industry doesn't get into another fight with Florida's hot-tempered governor, and there's no recession, no pandemic, and no hurricanes getting in the way of cruise ships.
I guess all I'm saying is that I see better risk/reward elsewhere. So, good-bye and good luck to all shareholders aboard $RCL.