RCL: EUROPE A THORN FOR THIS WALL STREET DARLING

Takeaway: The momo has stalled.

CALL TO ACTION

RCL was the darling in 2014, up 74% in share price. 2015 is a different story as the stock has lagged CCL and NCLH, -11% YTD versus +3% and +11%, respectively. While the stock clearly got ahead of itself, we also think RCL is facing some fundamental headwinds, particularly in Europe.  For the last several months, we’ve been highlighting emerging weakness in Europe and it appears that RCL’s Q1 and forward guidance corroborates our monthly pricing surveys. 

Moving forward, 2015 estimates are no slam dunk as European uncertainty remains. Given our current estimates, we think there’s a chance they miss Double Double targets in 2017. RCL’s still elevated valuation leaves little room for error so we’ll stay negative.

Please see our detailed note: 

http://docs.hedgeye.com/HE_RCL_4.21.15.pdf