Home » Features » Here Is A Stock You Shouldn’t Buy In February

Here Is A Stock You Shouldn’t Buy In February

Dimitar Bogdanov
  • February 5th, 12:31
  • Last Updated: February 5th, 12:32
  • 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.

Summary

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%. 

About the author

Dimitar Bogdanov
Dimitar Bogdanov
I have been a journalist for Invezz since 2012 and am one of the oldest on the team. My focus is on cryptocurrencies as well as general equity markets, although my experience is broad overall.

Leave a Reply

Investing is speculative. When investing your capital is at risk. This site is not intended for use in jurisdictions in which the trading or investments described are prohibited and should only be used by such persons and in such ways as are legally permitted. Your investment may not qualify for investor protection in your country or state of residence, so please conduct your own due diligence. This website is free for you to use but we may receive commission from the companies we feature on this site. Click here for more information.