There are signs that demand for cruises keep growing, with record bookings post-Thanksgiving
Shares of Royal Caribbean Corp. have been flying this year, as they ride record win streak to new heights, and there’s still no reason to believe they will fall back to earth anytime soon.
“Based on our channel checks and conversations with the agent community, it’s very clear demand for cruising has not slowed down at all,” wrote Stifel analyst Steven Wieczynski in a Friday note to clients.
The stock RCL+2.77% was up 0.3% in premarket trading Friday, which puts it on track to book a third-straight record close.
It was also headed for a weekly gain of a little more than 3%, which would be the 13th-straight weekly gain. That would break the current record of 12-straight weekly gains that ended in September 2018. The stock went public in April 1993.
Wieczynski reiterated the buy rating he’s had on the stock for at least the past three years, and raised his price target to $310 from $250. That makes him the most bullish of the 25 analyst surveyed by FactSet who cover the cruise operator.
Here’s why Wieczynski’s now so bullish on the stock.
He said he’s heard from his agent sources that the four-day booking period after Thanksgiving was “extremely strong,” with certain agents reporting record booking levels.
“[T]here seems to be growing demand for cruise vacations throughout 2025 and into 2026, with most agents indicating the value proposition of taking a cruise as the number one reason clients are currently looking to book a cruise vacation,” Wieczynski wrote.
Keep in mind that despite the appearance cruises represent luxury vacations, Royal Caribbean Chief Executive Jason Liberty has said that he believes cruises are 20% cheaper than land-based vacations.
Among other reasons cruises have been so popular, Liberty has noted that consumers have 10% more vacation days than they did pre-COVID.
He also said in the company’s post-earnings call with analysts in late-October that “American households are wealthier than ever.” And as leisure spending has grown faster than most other spend categories, travel spending is outpacing other leisure categories.
Stifel’s Wieczynski said he believes Royal Caribbean will provide Wall Street, some time in early 2025, with a new set of long-term financial targets that should show investors that the stock is still undervalued.
He now believes it’s possible that earnings per share rise above $25 in late-2027 to 2028, which would be well more than double the current FactSet consensus for 2024 EPS of $11.67.
Wieczynski noted that the last time the company provided long-term targets was in February 2020, just before the COVID lockdowns. At that time, the company said it targeted EPS of more than $20 by 2025, which compares with the current FactSet consensus of $14.41.
However, he said if you back out the dilution from share sales during COVID, and assuming the company didn’t have to take on the “crisis” debt during that time, he estimates EPS would be in the $22 to $23 range next year.
That suggests to him that when Royal Caribbean presents its long-range targets, “they should not be taken lightly.” And history suggests that whatever the company lays out as its targets, “there is probably going to be material upside” in reality.
The stock has soared 94% so far this year, after rocketing a record 162% in 2023. In comparison, the Consumer Discretionary Select Sector SPDR ETF XLY+2.11% has rallied 27.5% this year and the S&P 500 index SPX+0.25% has advanced 27.4%.