Royal Caribbean (RCL 3.60%) shareholders sailed past a surging market in November as their stock rose 40% compared to the 11% increase in the S&P 500, according to data provided by S&P Global Market Intelligence.
Yet the rally removed just a small portion of wider losses for the cruise ship giant, whose shares remain lower by 40% so far in 2020.
Royal Caribbean, along with rivals Carnival and Norwegian Cruise Line Holdings, benefited from surging investor enthusiasm about the end of the COVID-19 pandemic. Positive vaccine development news last month kindled hope of an approaching resumption of business for these companies, which have been under no-sail orders for most of the last eight months.
The widespread availability of COVID-19 vaccines should support a rebound for the industry, perhaps by as early as mid-2021. But until then, Royal Caribbean's sales will stay near zero while operating losses mount.
Investors choosing to buy the stock today must balance the potential for a sharp business recovery against risks to the timing of that boost even as the company works to pay down the new debt it took on to help it navigate through the prolonged pause in global sailings. The improving vaccine picture lessened some -- but not all -- of those key risks to a cruise industry investment.