In a report released today, Andrew Didora from Bank of America Securities reiterated a Hold rating on Royal Caribbean (RCL – Research Report), with a price target of $265.00.
Andrew Didora has given his Hold rating due to a combination of factors that reflect both the opportunities and challenges facing Royal Caribbean. The company’s investor day emphasized its strategic earnings algorithm, which is projected to drive a 20% compound annual growth rate in earnings per share through 2027. This growth is underpinned by moderate capacity and yield growth, alongside strong cost controls. However, despite these positive projections, the market remains cautious due to near-term consumer concerns, which have not yet impacted consumer behavior according to RCL.
Another factor influencing the Hold rating is Royal Caribbean’s focus on expanding its share of the $2 trillion travel market, particularly through its competitive strengths and new product offerings like the Celebrity River cruises. While these initiatives are promising, the cruise industry still represents a small fraction of the overall vacation market. Additionally, while the company’s capital returns and balance sheet are well-positioned, with reasonable net leverage goals, the potential for stock buybacks could impact these metrics. These elements combined suggest a balanced risk-reward scenario, justifying the Hold rating.
In another report released yesterday, Morgan Stanley also maintained a Hold rating on the stock with a $270.00 price target.
Based on the recent corporate insider activity of 55 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of RCL in relation to earlier this year.