Here Is A Stock You Shouldn’t Buy In February

Here Is A Stock You Shouldn’t Buy In February

  • The Royal Caribbean Cruises stock price has dipped 15% in two weeks on coronavirus fears
  • Company cuts earnings guidance to $0.80 - $0.85 per share from analysts’ estimates of $1.15
  • “It seems likely that we will have to cancel more [cruises], but we don’t know how many,” says CEO

The  coronavirus death toll has now risen to 490, with nearly 25,000 people infected. The mortality rate is at around 2%, and the experts believe that the number of deaths will increase in the coming days. 

As a result, certain industries are taking a bigger hit than the others. For instance, shares of major airline companies have moved lower in the past weeks as flights to and from mainland China are suspended. 

Similarly, the Royal Caribbean Cruises stock price has also dipped 15% in two weeks amid coronavirus fears. The latest statement from the company’s CEO hinted that the period of uncertainty lies in front of the cruise giant.

“Obviously the biggest issue of the day is the Wuhan coronavirus….Unfortunately, no one knows how this outbreak will play out and we don’t know how it will ultimately impact us,” Chief Executive Richard Fain said in a post-earnings conference call. 

Fain also lowered the earnings guidance to $0.80 – $0.85 per share for the first quarter, compared to market expectations of $1.15. The cut in guidance is directly tied to future cruise bookings in China.

“Again, and here I’m sounding like a broken record, we just don’t know,” said Fain when asked about the impact on bookings outside of China.

Royal Caribbean has been forced to cancel 8 cruises outside of China so far, with fears that the number may increase in the coming days and weeks. 

“It seems likely that we will have to cancel more, but we don’t know how many. This is all very disappointing to us,” Fain added. 

In addition to the cancelled cruises, the cruise giant has also taken other measures to protect its passengers, such as the boarding restriction for anyone who has traveled through mainland China or Hong Kong in the past two weeks. 

Technical analysis: More room for losses

Technically speaking, the Royal Caribbean stock price has created a failed breakout out of the triangle. The failure may ultimately result in a more meaningful move lower.

The price is currently supported by the 200-DMA at $115. A break of this level would open the door for a test of the 100-DMA at $107, which is likely to be the next target for the bulls amid coronavirus uncertainty. 

Royal Carribean stock daily chart (TradingView)

Two long wicks to the upside should concern the bulls as this is a  signal that the bears rejected two attempts for a move higher. Hence, don’t be surprised if the Royal Caribbean stock price moves further lower in the coming days and weeks, which makes it unattractive for investors.


The coronavirus outbreak causes more problems for travel and transport companies. The Royal Caribbean Cruises has been forced to cancel 8 cruises from China, which prompted the company’s management to cut first quarter earnings guidance by 25%. 

By Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to Invezz. His passion has given him first hand experience of trading, while his writing means he understands the market forces and wider regulation.

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