RCL Stock: Royal Caribbean May See a Lift Off Positive Industry News

Fundamentally, you don’t need to look far for reasons to stay away from Royal Caribbean Cruises (NYSE:RCL). Even in the best of circumstances, cruise ships are giant floating Petri dishes. With cramped conditions combined with the presence of food, beverages and a sense of jovialness, it doesn’t take much to get sick. And that’s precisely why RCL stock sank from its highs following the outbreak of the novel coronavirus.

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At the same time, there’s an inherent risk in beating a dead horse too often. As happens more frequently than people care to admit, when too many folks bet on the same outcome, it begs the opposite result. Moreover, with RCL stock, some striking evidence suggests that the underlying industry is due for a robust recovery.

That was clear last Friday when rival Carnival (NYSE:CCL) popped up nearly 11%. According to the company’s business update, “cumulative advanced bookings for the full year of 2021 capacity currently available for sale remain within historical ranges at prices that are down in the low to mid-single digits range, on a comparable basis, including the negative yield impact of FCCs [future cruise credits] and onboard credits applied.”

If so, this is a strong indicator that consumer sentiment is steadily returning, aligning well with an increase in airline passenger volume since its April lows. Additionally, Royal Caribbean generated its own headlines, buying up the remaining shares of Silversea Cruises that it didn’t already own.

True, Royal bought the remaining stake via 5.2 million shares of RCL to save cash. However, the bigger narrative was that the company was interested in making any acquisitions at all. Essentially, it put its money where its mouth was.

Be Wary of the Longer-Term Outlook for RCL Stock

Beyond the travel industry, cruise line contrarians have another catalyst to bank on – the improving economy. In another stunning display, the June jobs report revealed that total nonfarm payroll employment rose by 4.8 million. Again, this beat expectations, just like the prior May jobs report did.

Better yet, the unemployment rate dropped to 11.1%. Naturally, the Trump administration bragged about the data, which in its view is confirmation that the economy is bouncing back. Obviously, if this trend sustains, it would provide a much-needed lifeline for the President.

At this juncture, the economy is Trump’s major “accomplishment.” Losing that would be detrimental – though perhaps not untenable – to his chances for reelection.

However, so many holes exist in this bullish argument that I’m not sure where to begin. First, the data doesn’t account for states pausing or rolling back their reopening initiatives due to resurgent coronavirus cases. Second, we’re talking about dead-cat bounces from a cataclysmic drop; of course, the…