On Friday, Stifel raised the price target for Royal Caribbean Cruises (NYSE:RCL) shares to $200 from $180, while maintaining a Buy rating on the stock.
The firm's optimism is based on robust demand for cruise vacations, as indicated by recent interactions with the company's management and checks within the travel agent community.
The analyst from Stifel highlighted that demand for cruising remains strong and is expected to grow into 2025 and 2026. Travel agents have pointed out the value proposition of cruise vacations as a significant factor driving bookings. This positive outlook comes ahead of Royal Caribbean's expected 2Q24 earnings report, which is anticipated within the next two weeks.
Stifel has increased its EBITDA estimates for Royal Caribbean for the years 2024 through 2026, positioning them ahead of the consensus and the company's own guidance for 2024. The new price target of $200 is based on a multiple of 12.5 times the projected 2025 EBITDA, suggesting an upside of over 20% from the stock's current trading levels.
The firm's confidence is bolstered by strong booking and pricing patterns, which support the raised financial forecasts. The analyst's recent experience on Royal Caribbean's latest ship, Utopia of the Seas, also contributed to the positive assessment of the company's outlook.
Investors and market watchers will be looking forward to Royal Caribbean's upcoming earnings release to gauge the company's performance and assess the impact of the strong demand on its financial results.
In other recent news, Royal Caribbean, Carnival (NYSE:CCL), and Norwegian Cruise Line (NYSE:NCLH) Holdings are offering discounted fares for summer voyages. This move comes as an increased number of vessels are set to cruise the Caribbean and Alaska, with ships being rerouted from Red Sea routes due to conflict.
Despite record demand and a surge in revenue, domestic cruise prices in the United States this summer are expected to be lower than last year. Royal Caribbean, in particular, is reducing rates for Caribbean cruises in the third and fourth quarters of this year. Newer ships, like Royal Caribbean's Icon (NASDAQ:ICLR) of the Sea, however, are priced higher due to high interest.
Argus and Deutsche Bank have both upgraded their price targets for Royal Caribbean, reflecting optimism about the cruise operator's financial prospects following a spike in occupancy rates. Argus also maintained a Buy rating on the stock, emphasizing the company's potential for yield and earnings growth.
In response to the increased demand, Royal Caribbean is set to recruit around 10,000 workers throughout 2024, coinciding with the introduction of three new ships to the company's fleet.
The company's recruitment strategy is in line with its business approach of moderate capacity growth. Royal Caribbean has already approached educational institutions and is extending its hiring efforts to various regions such as The Gambia and St. Maarten. These are the latest developments in the cruise industry.
InvestingPro Insights
As Royal Caribbean Cruises (NYSE:RCL) sails towards its upcoming earnings report, key metrics from InvestingPro provide a snapshot of the company's financial health and market performance. With a robust market cap of $42.25 billion and a P/E ratio of 19.91, Royal Caribbean is navigating through the market with notable growth. The company's revenue has surged by 38.2% over the last twelve months as of Q1 2024, reflecting strong demand for its cruise vacations.
An InvestingPro Tip highlights that analysts have revised their earnings upwards for the upcoming period, aligning with Stifel's optimistic stance. Additionally, Royal Caribbean has delivered a strong return over the last year, with a 65.16% increase in the 1-year price total return. These figures underscore the firm's confidence in the company's potential for sustained growth.
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