Truist analysts upgraded Royal Caribbean (NYSE:RCL) to Buy from Hold and Carnival Corp. (NYSE:CCL) to Hold from Sell in a note to clients on Tuesday. In addition, the RCL price target was lifted to $137 from $115, while the CCL price target was raised to $17 from $16 per share.
The analysts noted that after conversations with senior executives at very large travel agencies specializing in cruises and examining "big data" on future bookings and pricing, "forward-looking trends for 2024 and 2025 look exceptionally strong."
"Specifically, 2024 industry-wide sales (cumulative occupancy + pricing) are pacing up approx. 55-60% vs. the same time in 2019 for T+1 and 2025 is up over 100% vs. the same time in 2019 for T+2," the analysts wrote.
"While new supply for these years vs. 2019 is up approx. 20% and 25% respectively, demand clearly continues to outpace supply," they added. Strong forward trends and "cooled-off stocks" have fuelled the firm's positivity on the sector once again.
For RCL, they said they now think "$12 of EPS in 2025" is the new "$10 of EPS in 2025" after the company reported two strong earnings beats and raises since its investor day last fall.
For CCL, the analysts contend that it is difficult to defend a Sell rating when they believe rising tides will lift all boats.