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GOOGL   143.96 (-0.09%)
AMZN   174.99 (+0.23%)
TSLA   191.97 (-2.76%)
NVDA   788.17 (+0.36%)
NIO   5.40 (-7.69%)
AMD   176.52 (-2.94%)
BABA   75.96 (-0.21%)
T   16.80 (+1.27%)
F   12.14 (+0.17%)
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GE   153.33 (+1.09%)
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Should You Take a Cruise in Royal Caribbean Stock?

Royal Caribbean stock price forecast

Key Points

  • Royal Caribbean forecasts full-year 2023 to return to profitability with EPS ranging from $3.00 to $3.66.
  • Consumer discretionary spending is shifting from goods to services like travel and leisure experiences.
  • The company recorded the most bookings ever during the seven weeks since November 2022 in WAVE season.
  • Consumer discretionary spending has shifted from goods to services like travel and leisure experiences.
  • RCL shares trade at 20.9X forward earnings with a 9.07% short interest.
  • 5 stocks we like better than Royal Caribbean Cruises

Cruise operator Royal Caribbean Group Ltd. NYSE: RCL is experiencing a record WAVE season, typically the first few months of the year when customers take advantage of cruise promotions. The seven biggest booking weeks in the company's history have occurred since November 2022.

Many industries like technology, feed delivery, and consumer discretionary are experiencing normalization pullbacks from the surge in pandemic business.

However, the travel and leisure industry continues to experience positive normalization back to and above pre-pandemic levels.

Discretionary Spending Shifts From Goods to Services

While high inflation and macroeconomic uncertainty have caused consumers to pull back on discretionary spending, it’s been shifted from goods to services. Rather than buy apparel and electronics, consumers are opting to spend on travel and leisure experiences. These tend to be booked ahead of time, as Airbnb Inc. NASDAQ: ABNB noted that guests are booking further in advance for more extended stays.

Airlines are reporting record consumer demand as United Airlines Holdings, Inc. NYSE: UAL, Delta Air Lines Inc. NYSE: DAL, and American Airlines Group Inc. NYSE: AAL all raised their guidance. However, if the economic climate unravels into a recession, it will impact discretionary spending on services as well.


Chipping Away the Red

On Feb. 7, 2023, Royal Caribbean released its fourth-quarter earnings for December 2022. The company reported an adjusted EPS loss of $1.12, beating consensus analyst estimates for a loss of $1.34 by $0.22. GAAP net loss was $500.2 million or $1.96 per share. Revenues climbed 165% year-over-year (YoY) to $2.6 billion, missing consensus analyst estimates of $2.61 billion. Total revenues per passenger grew 3.5% and 4.5% in constant currency compared to Q4 2019.

Booking demand for 2023 as Q4 booking demand was significantly higher than pre-COVID Q4 2019. The momentum continued into 2023, setting up for a record-breaking WAVE season. Consumer spending, both onboard and pre-cruise purchases, continue surpassing prior years as guests absorb higher prices for participation, indicating healthy future demand.

Royal Caribbean CEO Jason Liberty commented, "We are experiencing a record-breaking WAVE season, resulting in a booked position approaching previous record highs and higher prices. This, along with the normalization of our booking window, provides the visibility for us to provide annual guidance, which is in line with our Trifecta program."

Forecasting Full-Year 2023 Profitability

Royal Caribbean provided in-line guidance for Q1 2023 with EPS losses between $0.65 to $0.85 versus $0.80 consensus analyst estimates. Full-year 2023 is expected to produce adjusted EPS profit between $3.00 to $3.60 compared to $3.32 consensus analyst estimates. Net cruise costs (NCC) minus fuel costs are expected to rise 8.3% as reported and 8.5% in constant currency compared to 2019. This includes 320 bps of additional structure costs, lagging transitional costs, and timing of expenses.

Analyst Reactions

Bank of America upgraded shares of RCL to Neutral with a $78 price target from Underperform and a $40 price target. Analyst Andrew Didora feels balance sheet risk has become more balance. The WAVE booking season is off to the strongest start based on capacity-weighted sequential pricing increases, with Royal Caribbean up 3.1%, Carnival Co. & plc NYSE: CCL up 1.4%, and Norwegian Cruise Line Holdings Ltd. NASDAQ: NCLH up 0.9%. He noted, “Over the past six pricing surveys, RCL has performed on average the best out of the three cruise lines. Overall industry pricing in 2023 was +2.6% while 2024 was +0.5% higher sequentially."

Wells Fargo analyst Daniel Politzer expects China re-opening to be a longer-term tailwind for Royal Caribbean and Carnival, “With China travel resuming and the cruise industry recovering, we estimate RCL and CCL reallocating pre-COVID levels of capacity back to China (6% and 4%, respectively) could support higher yields equating to +$6/share for RCL and +$1/share for CCL.” 

Livermore Accumulation Cylinder

The weekly candlestick chart on RCL resembles a rare but powerful Livermore Cylinder named after the infamous trader Jesse Livermore. RCL bottomed out at $31.19 in July 2022 and made higher highs and lows in a zig-zag pattern. This is an accumulation pattern with expanding non-parallel higher highs and higher lows that conclude with a significant breakout and blow-off top. The resolution of this pattern could land shares above $100, but it's also essential to pay attention if the lower trendline breaks down.

Should You Take a Cruise in Royal Caribbean Stock?

After a pullback to a new swing low at $47.91, RCL triggered the weekly market structure low (MSL) breakout through $55.14 in January 2023 as the weekly stochastic crossed back up through the 80-band. RCL continued to rally higher on six consecutive candlestick body highs, peaking at $76.30 before forming a weekly market structure high (MSH) sell trigger on a breakdown under $69.10.

The weekly 20-period exponential moving average (EMA) support is rising at $60.27, followed by the 50-period MA at $55.27. If shares trigger the MSH, an oscillation pullback may provide a favorable entry opportunity as long it makes a higher low. Pullback supports are $64.46, $61.37, $55.14 weekly MSL trigger, $52.42, and $47.91.

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Should you invest $1,000 in Royal Caribbean Cruises right now?

Before you consider Royal Caribbean Cruises, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Royal Caribbean Cruises wasn't on the list.

While Royal Caribbean Cruises currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Royal Caribbean Cruises (RCL)
4.6654 of 5 stars
$121.91-0.5%N/A19.60Moderate Buy$128.64
Airbnb (ABNB)
3.0517 of 5 stars
$152.66-1.7%N/A21.09Hold$144.00
American Airlines Group (AAMRQ)
0 of 5 stars
$0.00-100.0%N/AN/AN/A
American Airlines Group (AAL)
4.3522 of 5 stars
$15.13-0.7%N/A13.75Hold$17.57
Bank of America (BAC)
4.8581 of 5 stars
$33.92+0.9%2.83%11.05Moderate Buy$35.53
Carnival Co. & (CCL)
4.9136 of 5 stars
$15.23+0.1%N/A-126.91Moderate Buy$20.56
Delta Air Lines (DAL)
4.8819 of 5 stars
$41.72-0.7%0.96%5.83Buy$55.54
Norwegian Cruise Line (NCLH)
2.9913 of 5 stars
$16.17-1.0%N/A-26.51Hold$19.61
Wells Fargo & Company (WFC)
4.4212 of 5 stars
$53.86+0.9%2.60%11.17Moderate Buy$51.43
Compare These Stocks  Add These Stocks to My Watchlist 

Jea Yu

About Jea Yu

  • JeaYu21@gmail.com

Contributing Author

Trading Strategies

Experience

Jea Yu has been a contributing writer for MarketBeat since 2018.

Areas of Expertise

Equities, options, ETFs and futures; fundamental, qualitative, quantitative and technical analysis and pattern identification; active and swing trading; trading systems and methodology development

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Bachelor of Arts, University of Maryland, College Park

Past Experience

U.S. equity markets trader, writer and analyst for over 25 years. Published four books by publishers McGraw-Hill, John Wiley & Sons, Marketplace Books and Bloomberg Press. Speaker at various expos and seminars and has been quoted and featured in USA Today, The Wall Street Journal, Traders Magazine, The Financial Times and various trade publications, including Stocks & Commodities, Active Trader and Online Investor.


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