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30 June, 2021 - 07:46pm
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Cruise line stocks sold off Monday amid growing concerns about a sailing setback due to Covid variants. Investors may want to buy the dip in at least one operator.
In a note Monday, Stifel wrote that the selloff creates a “solid buying opportunity” for shares of Royal Caribbean Group (ticker: RCL).
That stock lost 6.5% on Monday, versus a 0.2% gain for the S&P 500. The shares were up about 0.25% in early trading Tuesday to around $83 and change.
Stifel, which has a Buy rating on Royal Caribbean, cited several reasons for liking the stock, including healthy liquidity. It also said the company has “superior operational expertise and asset quality” and resilient core customers.
Royal’s Celebrity Edge vessel departed from Fort Lauderdale on Saturday, marking the first cruise out of a U.S. port in about15 months for the major cruise operators.
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Another reason for Monday’s selloff, the Stifel note observed, was Carnival’s (CCL) disclosure that it wanted to have the option to sell up to $500 million of its shares to buy back the company’s U.K.-listed shares.
The Stifel note observed that there was confusion about that move and that some “thought it was another round of equity dilution [which it is not].”
In a filing Monday, Carnival said that it would sell shares of its common stock “only when the ordinary shares are trading in a United Kingdom market at a discount to shares of common stock Carnival.”
The reason for this is that the U.K. shares trade at a discount to their U.S. counterparts, creating an arbitrage opportunity.
Carnival shares trade in the U.K. under the ticker CCL.London. But U.S. investors can own those shares through an ADR whose ticker is CUK.
On Tuesday morning, Carnival’s U.S. shares were at around $26, down about 0.3% on the day’s trading. The ADR was at around $23, down by about the same percentage.
Write to Lawrence C. Strauss at email@example.com
Cruise line stocks sold off Monday amid growing concerns about a sailing setback due to Covid variants.
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