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Is Royal Caribbean Stock a Buy, Sell or Hold at a 13.5x P/E?
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Royal Caribbean Cruises Ltd.’s (RCL - Free Report) stock is trading at a discount compared with the Zacks Leisure and Recreation Services industry. With a forward 12-month Price/Earnings ratio of 13.5x, it sits below the industry average of 16.88x and the Consumer Discretionary sector’s 17.6x.
The stock’s performance has been stellar, soaring 91.3% in the past year. The metric outpaced the industry’s 21.3% rise and the S&P 500’s 31.1% appreciation. During the same period, the Consumer Discretionary sector advanced just 15.2%. RCL has outperformed some other industry players, comprising Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) , Carnival Corporation & plc (CCL - Free Report) and OneSpaWorld Holdings Limited (OSW - Free Report) .
Stock Price Performance
Image Source: Zacks Investment Research
Technical indicators suggest continued strong performance for RCL. The stock trades above its 50-day moving averages, signaling robust upward momentum and price stability. This technical strength underscores positive market sentiment and confidence in RCL's financial health and prospects.
50-Day Moving Averages
Image Source: Zacks Investment Research
Estimate Revision Favoring the RCL Stock
Reflecting the positive sentiment around RCL, the Zacks Consensus Estimate for earnings per share has seen upward revisions. In the past 60 days, analysts have raised their estimates for 2024 and 2025 by 3.9% to $11.59 and 3.8% to $13.38, respectively.
Image Source: Zacks Investment Research
The stock’s compelling discounted valuation and strong upward price momentum, bullish technical signals and upward estimate revisions highlight its continued appeal to investors.
Factors Driving RCL Stock
The company is benefiting from robust booking. Since the beginning of 2024, Royal Caribbean has been witnessing solid booking volumes across all key itineraries, with a rise in consumer spending onboard and pre-cruise purchases.
The Caribbean continues to show exceptional strength in bookings, supported by significantly higher pricing. Europe, contributing 15% to total capacity and 28% in the third quarter, is also at record booking levels with elevated pricing. Alaska, which accounts for 6% of capacity and 14% in the third quarter, is performing well thanks to increased capacity and newer ships, with stronger-than-expected pricing in Europe and Alaska driving yield growth. Royal Caribbean resumed operations in China during the quarter with the Spectrum of the Seas.
Consumers are increasingly prioritizing spending on experiences, with a strong focus on travel. They now have 10% more vacation days compared to 2019 and are using half of that additional time to travel. The company’s research indicates that travel has become the top leisure spending category and consumers plan to further increase their travel budgets over the next year.
The company’s flexible sourcing model, combined with the global appeal of its brand and its leadership in various market segments, enables it to capture high-quality demand effectively. The approach attracts new and younger consumers, contributing to strong yield performance. As of June 30, 2024, RCL had $6.2 billion in customer deposits compared with $6 billion as of March 31, 2024.
The company focuses on new innovative ships and onboard experiences to differentiate its offering and deliver superior yields and margins. Recently, it launched Silver Ray, which redefines the ultra-luxury cruise segment and attracts a younger audience. The Utopia of the Seas was also introduced to attract younger travelers and cater to short-term cruises. Upcoming expansions include Celebrity Cruises’ Celebrity Excel, set to launch in late 2025 and Royal Caribbean’s Star of the Seas, debuting in mid-2025. The third Icon class ship is planned for 2026 and the seventh Oasis-class ship is scheduled for 2028.
Conclusion
Royal Caribbean presents a compelling investment case with its stock trading at a discounted valuation. RCL's impressive stock price performance over the past year underscores its robust market performance. Key drivers include strong bookings across key regions like the Caribbean and Europe, elevated pricing and innovative fleet expansions targeting younger consumers. Bullish technical indicators, upward earnings revisions and increased consumer spending on travel further support RCL's growth prospects, making the Zacks Rank #2 (Buy) stock appealing for continued investor interest.
Image: Bigstock
Is Royal Caribbean Stock a Buy, Sell or Hold at a 13.5x P/E?
Royal Caribbean Cruises Ltd.’s (RCL - Free Report) stock is trading at a discount compared with the Zacks Leisure and Recreation Services industry. With a forward 12-month Price/Earnings ratio of 13.5x, it sits below the industry average of 16.88x and the Consumer Discretionary sector’s 17.6x.
The stock’s performance has been stellar, soaring 91.3% in the past year. The metric outpaced the industry’s 21.3% rise and the S&P 500’s 31.1% appreciation. During the same period, the Consumer Discretionary sector advanced just 15.2%. RCL has outperformed some other industry players, comprising Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) , Carnival Corporation & plc (CCL - Free Report) and OneSpaWorld Holdings Limited (OSW - Free Report) .
Stock Price Performance
Image Source: Zacks Investment Research
Technical indicators suggest continued strong performance for RCL. The stock trades above its 50-day moving averages, signaling robust upward momentum and price stability. This technical strength underscores positive market sentiment and confidence in RCL's financial health and prospects.
50-Day Moving Averages
Image Source: Zacks Investment Research
Estimate Revision Favoring the RCL Stock
Reflecting the positive sentiment around RCL, the Zacks Consensus Estimate for earnings per share has seen upward revisions. In the past 60 days, analysts have raised their estimates for 2024 and 2025 by 3.9% to $11.59 and 3.8% to $13.38, respectively.
Image Source: Zacks Investment Research
The stock’s compelling discounted valuation and strong upward price momentum, bullish technical signals and upward estimate revisions highlight its continued appeal to investors.
Factors Driving RCL Stock
The company is benefiting from robust booking. Since the beginning of 2024, Royal Caribbean has been witnessing solid booking volumes across all key itineraries, with a rise in consumer spending onboard and pre-cruise purchases.
The Caribbean continues to show exceptional strength in bookings, supported by significantly higher pricing. Europe, contributing 15% to total capacity and 28% in the third quarter, is also at record booking levels with elevated pricing. Alaska, which accounts for 6% of capacity and 14% in the third quarter, is performing well thanks to increased capacity and newer ships, with stronger-than-expected pricing in Europe and Alaska driving yield growth. Royal Caribbean resumed operations in China during the quarter with the Spectrum of the Seas.
Consumers are increasingly prioritizing spending on experiences, with a strong focus on travel. They now have 10% more vacation days compared to 2019 and are using half of that additional time to travel. The company’s research indicates that travel has become the top leisure spending category and consumers plan to further increase their travel budgets over the next year.
The company’s flexible sourcing model, combined with the global appeal of its brand and its leadership in various market segments, enables it to capture high-quality demand effectively. The approach attracts new and younger consumers, contributing to strong yield performance. As of June 30, 2024, RCL had $6.2 billion in customer deposits compared with $6 billion as of March 31, 2024.
The company focuses on new innovative ships and onboard experiences to differentiate its offering and deliver superior yields and margins. Recently, it launched Silver Ray, which redefines the ultra-luxury cruise segment and attracts a younger audience. The Utopia of the Seas was also introduced to attract younger travelers and cater to short-term cruises. Upcoming expansions include Celebrity Cruises’ Celebrity Excel, set to launch in late 2025 and Royal Caribbean’s Star of the Seas, debuting in mid-2025. The third Icon class ship is planned for 2026 and the seventh Oasis-class ship is scheduled for 2028.
Conclusion
Royal Caribbean presents a compelling investment case with its stock trading at a discounted valuation. RCL's impressive stock price performance over the past year underscores its robust market performance. Key drivers include strong bookings across key regions like the Caribbean and Europe, elevated pricing and innovative fleet expansions targeting younger consumers. Bullish technical indicators, upward earnings revisions and increased consumer spending on travel further support RCL's growth prospects, making the Zacks Rank #2 (Buy) stock appealing for continued investor interest.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.