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Royal Caribbean stock gets bullish nod from Mizuho, eyes on new attractions and cost management

EditorEmilio Ghigini
Published 04/17/2024, 05:07 AM

Wednesday - Mizuho Securities has initiated coverage on Royal Caribbean Cruises (NYSE:RCL) stock with a Buy rating, setting a price target of $164. The firm's analysis points to the cruise operator's prospects for growth, underpinned by its fleet of quality ships and unique destinations which could lead to higher demand and earnings.

Royal Caribbean's expansion plans, including the development of new attractions such as Hideaway Beach and Royal Beach Club, as well as the introduction of the Icon (NASDAQ:ICLR) of the Seas ship, are expected to stimulate incremental demand. These initiatives are part of the three main drivers that form the basis of Mizuho's positive outlook on the stock.

The firm also anticipates that Royal Caribbean will outperform earnings estimates due to better-than-expected cost management. Mizuho's EBITDA projections for the years 2024 and 2025 are $5.6 billion and $6.3 billion, respectively. These figures compare favorably to the consensus estimates on the Street, which stand at $5.6 billion for 2024 and $6.1 billion for 2025.

In addition to the anticipated demand growth and cost efficiencies, Mizuho believes that the current valuation of Royal Caribbean's shares presents a favorable risk/reward scenario. The firm suggests that the potential upside far outweighs the downside, with an estimated ratio of approximately 4:1.

The Buy rating and the $164 price target reflect Mizuho's confidence in Royal Caribbean's ability to leverage its asset mix and destination offerings to deliver above-average returns to investors. The cruise line's strategic investments and operational strengths are seen as key factors in driving the company's financial performance in the coming years.

InvestingPro Insights

Complementing Mizuho Securities' optimistic outlook on Royal Caribbean Cruises, InvestingPro data and tips provide additional context for investors considering RCL stock. The company's market capitalization stands at a robust $32.5 billion, and with a P/E ratio of 19.0 for the last twelve months as of Q4 2023, it is trading at a low P/E ratio relative to near-term earnings growth. This aligns with one of the InvestingPro Tips that highlights the stock as trading at a low P/E ratio in the context of its earnings trajectory.

Furthermore, Royal Caribbean has shown impressive revenue growth of 57.24% over the last twelve months as of Q4 2023, indicating a strong recovery and potential for future expansion. The company's return on assets for the same period stands at 4.95%, reflecting efficient use of its assets to generate earnings. These figures underscore the firm's analysis of the cruise operator's growth prospects and ability to outperform earnings estimates.

For those interested in the volatility and potential for quick gains, InvestingPro Tips also note that RCL's stock price movements have been quite volatile, with a significant price uptick of 59.87% over the last six months. This could be an attractive point for investors looking for dynamic stock performance. Additionally, there are 10 analysts who have revised their earnings upwards for the upcoming period, indicating a positive sentiment among experts.

Investors can explore additional insights and tips on Royal Caribbean by visiting InvestingPro, where there are 10 more tips available to help make informed decisions. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription for even deeper analysis and expert perspectives.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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