Shares of embattled cruise line operator Royal Caribbean (NYSE:RCL) are performing better than they have in some time today, rising 7.7% as of 12:45 p.m. EDT on an only moderately green day for the stock market.
Royal Caribbean shareholders can probably thank Stifel Nicolaus for that.
This morning, investment banker Stifel issued a report calling Royal Caribbean Cruises "the best positioned cruise operator to navigate through this unprecedented operating environment," according to TheFly.com. Royal Caribbean is not only more liquid than its rivals, argues the analyst, but it has a better brand and more unique travel itineraries than competitors offer, both of which should put the company in good standing once cruising resumes (whenever that happens).
In summary, Stifel still considers Royal Caribbean stock a buy, and today, it upped its price target on the shares 20%, from $40 to $48.
Investors are responding as you'd expect them to, by bidding up beaten down Royal Caribbean shares that have already lost more than 70% of their value over the past year. Even so, at a share price of just $36 or so, there's potential for Royal Caribbean stock to go higher -- as much as 33% higher in fact -- if Stifel is right in its analysis.
Is Stifel correct to be recommending Royal Caribbean, though? That's where I have my doubts. Although certainly cheap-looking at about four times trailing earnings today, Royal Caribbean stock is steaming head-on toward a recession with its ships still stuck in port and $11.6 billion in net debt (at last report).
With no clear idea of when its ships might resume sailing, Royal Caribbean's ability to service that debt looks questionable at best. Until we get a better idea when things might get back to normal, I continue to view this stock as too hot to handle.