TD Cowen initiates Royal Caribbean stock with Buy rating, $405 target

Investing.com - TD Cowen initiated coverage on Royal Caribbean Cruises (NYSE:RCL) with a Buy rating and a price target of $405.00 on Tuesday. The stock, which has delivered an impressive 108% return over the past year according to InvestingPro data, is currently trading near its 52-week high of $352.68.

The firm cited yield growth driven by the cruise line’s Icon (NASDAQ:ICLR) class ship deliveries scheduled each year through at least 2027. TD Cowen projects a five-year net yield compound annual growth rate (CAGR) of 4.4%, outpacing net cruise costs by 2.5%.

TD Cowen noted Royal Caribbean’s projected net margin of approximately 24% for 2025 exceeds anything seen at major cruise lines in the past 20 years and is more than double its competitors’. The firm believes margins can rise further to over 29% by 2029.

The analysis projects a five-year net income CAGR of approximately 18%, with earnings per share CAGR exceeding 19% due to share repurchases. TD Cowen also expects Royal Caribbean’s River Cruise initiative to add about 60 basis points to revenue growth annually starting in 2028.

With leverage decreasing, TD Cowen forecasts capital returns to increase from $1.7 billion in 2025 to $4.0 billion in 2026 and nearly $6 billion by 2029.

In other recent news, Royal Caribbean Cruises has been the focus of several notable developments. The company is set to release its second-quarter earnings on July 29, with expectations of strong results following a 6.9% year-over-year price increase in July, as noted by Bernstein. This growth is particularly robust in European markets, which showed double-digit gains. Stifel has raised its price target for Royal Caribbean to $400 from $310, citing strong forward demand and pricing trends, as well as potential benefits from land-based projects. Similarly, Bernstein has increased its price target to $360 from $290, highlighting improvements in operating margins and return on invested capital since the pandemic.

In leadership news, Royal Caribbean announced that Richard Fain will retire as Chairman in the fourth quarter of 2025, with current President and CEO Jason Liberty set to assume the role. John Brock will become the Independent (LON:IOG) Lead Director, bringing extensive leadership experience to the board. Stifel analysts have also raised their price target to $310 from $275, maintaining a Buy rating and expressing confidence in Royal Caribbean’s demand outlook through 2026. Despite some investor concerns about potential demand declines, Royal Caribbean’s management remains optimistic about continued strong performance.

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