Why Shares of Royal Caribbean Cruises Fell 6% Today

MarketsMotley Fool

What happened

Shares of Royal Caribbean Cruises (NYSE: RCL) fell as much as 6% in trading today as the stock market plunged once again. At 3:30 p.m. EST on Thursday, shares were still down 5.2% and showed no signs of recovering.

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So what

The Dow Jones Industrial Average is down 2.6% and the S&P 500 is down 2.3% today, so Royal Caribbean has fallen more than the market. That's not a huge surprise given that cruise lines are very highly leveraged in their operations. Even a small reduction in revenue could lead to a large decline in earnings, and that's what worries investors right now.

To be clear, there hasn't been any bad operating news from Royal Caribbean today; it's just a market shift that drove the stock. What investors should watch for are signs of a slowing economy or falling consumer spending, which could affect revenue long term.

Now what

Today, I don't think there's a reason to panic for Royal Caribbean shareholders. The market has been swinging wildly lately, and this is just the latest such move. In fact, with shares trading at a trailing P/E ratio of 11 and a 3% dividend yield, there could be nice value for buyers today. If the economy continues to grow, Royal Caribbean should grow along with it, and could be a big winner long term.

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Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.