Stifel Raises Price Target on Royal Caribbean Stock, Maintains Buy Rating on New Project From Investing.com

On Friday, the financial services company Stifel raised the price target for the shares of Royal Caribbean Cruises (NYSE:) raised from $200 to $230 while maintaining a Buy rating. This adjustment follows Royal Caribbean’s announcement earlier this week that it is developing a new Perfect Day concept in Costa Maya, Mexico, scheduled to open in 2027.

Royal Caribbean’s original Perfect Day concept, which launched on CocoCay in the Eastern Caribbean in May 2019, laid the foundation for this expansion. Although the company has not disclosed the financial details of the new project, they believe the initial cost of developing CocoCay is approximately $250 million, with further investments bringing the total to an estimated $450 million.

The planned Perfect Day Mexico will include a pier for four ships, which represents a significant increase in capacity compared to CocoCay. This expansion is expected to accommodate 1.5 to 2 times more passengers than CocoCay’s current capacity.

At full capacity, CocoCay is estimated to be able to host approximately 3.5 million guests per year. In comparison, Perfect Day Mexico is planned as an even larger concept, with the potential to welcome around 5 million guests annually when fully operational. This ambitious project underscores Royal Caribbean’s commitment to enhancing its offering and building its guest capacity in the coming years.

In other recent news, leading cruise lines Royal Caribbean, Norwegian Cruise Line and Carnival Corporation are the focus of positive developments. Brokerage firm Citi upgraded its rating on Norwegian Cruise Line to “buy” from “neutral,” pointing to strong growth indicators for the cruise industry. The firm’s optimism is based on web traffic analysis and promising pricing data for the industry through 2025 and beyond.

Royal Caribbean has been actively managing its debt portfolio, including by completing a $1.5 billion offering of senior unsecured notes. The proceeds from this offering will be earmarked for repayment of existing indebtedness and to effectively manage the Company’s debt profile.

In addition, Royal Caribbean increased a private offering of senior unsecured notes from $1 billion to $1.5 billion. The funds are intended to repay outstanding senior notes due 2030 and to repay obligations under the Silver Dawn finance lease. The company also successfully completed a $2 billion private offering of 6,000% senior notes due 2033, aimed at reducing interest costs.

Analysts at Tigress Financial Partners gave Royal Caribbean a Buy rating and raised their price target to $210, highlighting the company’s continued revenue and cash flow growth. These developments reflect the strategic moves and financial health of companies in recent times.

InvestingPro Insights

Royal Caribbean Cruises’ ambitious expansion plans are consistent with its strong financial performance and market position. According to InvestingPro data, the company’s trailing twelve month revenue growth through Q2 2024 stands at an impressive 27.7%, with robust EBITDA growth of 85.54% over the same period. These numbers suggest that Royal Caribbean has the financial strength to realize major projects such as the new Perfect Day concept in Costa Maya.

The market has responded positively to Royal Caribbean’s growth strategy, with the stock posting a remarkable total return of 117.54% over the past year. This performance is reflected in two key InvestingPro picks: The stock is trading near its 52-week high and has delivered a significant return in the last week.

However, investors should note that the stock’s current valuation metrics are elevated. The company is trading at a high price-to-book ratio of 8.75, which could suggest that the market has already priced in much of the expected growth. For a more comprehensive analysis, InvestingPro offers 11 additional tips for Royal Caribbean Cruises that provide investors with a deeper understanding of the company’s financial health and market position.

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