Shares of Royal Caribbean (NYSE:RCL) have nearly quadrupled in value from their March lows but remain 45% below where they started 2020, as the coronavirus pandemic has canceled virtually all cruise ship activity until next year.

While it has been thrown a lifeline by its lenders, it is still burning through $250 million a month and has posted three consecutive quarters where its losses exceeded $1 billion. Even if it does return to a more normal cruise schedule next year, analysts suspect it will be several years before it's operating at pre-pandemic levels.

With that as a backdrop, let's consider whether Royal Caribbean can be a millionaire-maker stock.

Couples on the deck of a cruise ship at sea.

Image source: Getty Images.

On rough seas

The cruise ship industry is battling more than just the COVID-19 outbreak. It needs to get beyond the perception that ships are Petri dishes incubating the virus, and stepping aboard could be a fatal error.

Cruise ships got a bad rap early on in the pandemic because COVID-19 cases seemed to escalate quickly before all ships were dry-docked by no-sail orders. However, subsequent analysis showed they suffered no greater rates of infection -- and more importantly, no greater risk of death -- than the public at large.

While the U.S. Centers for Disease Control (CDC) gave the industry a conditional mandate to begin a phased-in calendar for sailing again beginning this month, Royal Caribbean, Carnival, and Norwegian Cruise Lines chose instead to postpone most cruises until 2021.

However, this past weekend, the CDC seemed to reverse course and recommended no one go on a cruise. In updating its risk assessment of cruise ships, the health agency raised the warning to its highest level -- Level 4 -- and said, "Cruise passengers are at increased risk of person-to-person spread of infectious diseases, including COVID-19."

Although the stocks of Royal Caribbean and its peers shrugged off the change, it will do little to help the perception of the industry and may weigh on the cruise lines long afterwards.

A lack of ballast

Royal Caribbean is burning through cash. Last quarter it reported generating just $32 million in revenue, down from $2.3 billion a year ago. While this revenue drop is not surprising since its ships were stuck in port, losses continue to mount.

The cruise ship operator reported losing $1.3 billion for the period, which followed a $1.6 billion loss in the second quarter and a $1.4 billion loss in the first. It confirmed its monthly cash burn has been between $250 million and $290 million during the shutdown, and it won't be able to relieve any of the pressure on that rate until it can begin sailing again.

However, Royal Caribbean did shore up its liquidity during the crisis. While it added to the total amount of debt it will be carrying on the books -- a massive $17.6 billion in long-term debt plus $870 million due within a year -- Royal Caribbean has $3 billion in cash and $700 million in short-term loan commitments. The company also plans to issue $500 million in new stock and $500 million in senior convertible notes due in 2023. It shouldn't be sinking to Davy Jones locker any time soon.

A question of value

Investors need to toss out most conventional metrics when looking at cruise ship operators these days. They don't look healthy, and the picture's not going to get better any time soon.

CFO Jason Liberty pretty much writes off 2021 and instead prefers to look out to 2022 and 2023 when discussing the potential for returning to pre-pandemic capacity levels. That seems a smart way to view the situation, even if he's not comfortable assigning any percentages to it.

An investor should assess whether Royal Caribbean can actually survive until then, which it appears it can, and then whether its valuation makes it a buy. Cruises remain in demand as evidenced by the numbers of consumers wanting to take one next year even if cruise ship lines are operating at reduced capacity. And once this crisis is behind us, Royal Caribbean should be sailing on much calmer seas

So long as no one expects to see their investment turn themselves into a millionaire in the next 12 months, I see this cruise ship stock as a good long-term value.