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Why Royal Caribbean Stock Dove 60% in March

By Demitri Kalogeropoulos – Apr 2, 2020 at 8:22AM

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Investors abandoned the stock as the cruise fleet went out of service to wait out the COVID-19 pandemic.

What happened

Royal Caribbean Cruises (RCL -13.15%) shareholders underperformed a weak market last month as the stock lost 60% compared to a 12.5% drop in the S&P 500, according to data provided by S&P Global Market Intelligence.

The decline added to historically difficult times for the cruise ship giant's investors, who are down nearly 80% so far in 2020.

A cruise ship docked near an island.

Image source: Getty Images.

So what

The vacation industry was disrupted by COVID-19, which sharply reduced demand for most businesses that cater to travelers. Yet cruises were hit especially hard because their ships provide an ideal platform for such viruses to spread.

Royal Caribbean, along with all its peers, responded to health concerns and plummeting demand by grounding its entire fleet last month. The sudden pause in revenue, along with news that cruise ships wouldn't be receiving significant financial assistance from the government, contributed to the collapsing stock value.

Now what

Royal Caribbean raised nearly $4 billion of cash in recent days, which should help it navigate a temporary suspension that appears set to last at least through April. However, the actual length of the pause isn't clear right now. Investors also have no way of knowing when the cruise giant's business will return to its normal operating volumes following the lifting of global stay-at-home recommendations. Thus, it could be some time before the stock recovers last month's losses.

Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Royal Caribbean Cruises Ltd. Stock Quote
Royal Caribbean Cruises Ltd.
$37.90 (-13.15%) $-5.74

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