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On Wednesday, CFRA analysts adjusted their rating for Royal Caribbean Cruises (NYSE:RCL), elevating the stock from Hold to Buy. Accompanying this upgrade, they set a new price target of $297.00, signaling confidence in the company’s financial trajectory. The cruise operator, currently valued at $58 billion, has demonstrated strong momentum with a 58.4% return over the past year, according to InvestingPro data.
The upgrade follows a comprehensive analysis of Royal Caribbean’s recent financial performance and potential future earnings. CFRA’s assessment was based on the company’s latest earnings report and a detailed examination of its 10-K GAAP loss triangles. This evaluation led to an optimistic outlook on the cruise operator’s shares, which is supported by the company’s impressive 18.6% revenue growth and GREAT financial health score, as reported by InvestingPro.
CFRA’s analysts cited several factors contributing to their positive stance, including Royal Caribbean’s February 2025 earnings report, which surpassed their expectations. They revised their earnings per share (EPS) estimates for 2025 and 2026 upward to $15.60 and $14.40, respectively, from the previous $15.55 and $14.35. InvestingPro analysis shows the stock trading at an attractive PEG ratio of 0.26, suggesting reasonable valuation relative to growth potential. Get access to 8 more exclusive ProTips and comprehensive valuation metrics with an InvestingPro subscription.
The analysts’ revised estimates reflect several key expectations: a slightly larger release of reserves for 2025 and a modest reduction in core loss ratios for 2026. These adjustments are partially balanced by a projected modest decrease in investment income.
The new price target of $297.00 represents a significant increase from the prior target of $294.00. This target is based on a valuation of 20.8 times the firm’s projected 2026 earnings per share. CFRA’s outlook suggests that they anticipate the cruise line to continue performing well and delivering value to its shareholders.
Royal Caribbean Cruises has not publicly responded to CFRA’s rating upgrade and new price target at the time of reporting. The company’s stock performance in the upcoming weeks and months will indicate whether CFRA’s positive projections will be realized.
In other recent news, Royal Caribbean Cruises has announced a financial maneuver involving the exchange of approximately $200 million of its Convertible Senior Notes due 2025 for a combination of cash and common stock. This transaction is part of the company’s strategy to manage its capital structure and is expected to close in March 2025. The move aims to reduce the company’s fully diluted weighted average shares outstanding. In the realm of analyst ratings, Stifel has maintained its Buy rating for Royal Caribbean with a price target of $310, expressing confidence in the company’s strong demand and pricing for cruises, particularly for the latter half of 2025 and into 2026. Similarly, Citi has upheld its Buy rating with a $304 price target, despite concerns about potential consumer cutbacks due to broader economic issues. Citi analysts remain optimistic about Royal Caribbean’s long-term prospects, projecting earnings per share for 2027 to potentially surpass $20. Meanwhile, the travel sector, including Royal Caribbean, has been impacted by Delta Air Lines (NYSE:DAL)’ announcement of reduced profit guidance, contributing to a broader market sell-off. As the cruise industry navigates these developments, investors continue to monitor the situation closely for further updates.
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