
Analyst Sees Upside Potential
Royal Caribbean Cruises Ltd. (RCL) shares are on the rise after a positive analyst report from JPMorgan. Analyst Matthew R. Boss reiterated his Overweight rating on the stock and increased his price target from $253 to $295.
Boss cites several factors driving his optimism. Firstly, he sees continued strong demand for cruises, with Royal Caribbean management focused on optimizing bookings for 2025 and beyond. This includes utilizing artificial intelligence, which now drives 95% of the company's price points, allowing for dynamic adjustments similar to airlines.
an increase in spending throughout the year and improved booking trends, with 2025 bookings exceeding last year's levels.
Boss highlights Royal Caribbean's small market share of just 1% in the $1.9 trillion global vacation market, which is estimated to grow at 4% annually. He believes the company is well-positioned to capture a larger share, especially considering the cruise sector's current 3-4% share.
The analyst emphasizes management's goal of achieving a 50% spread between yields and costs, which will set the stage for future expansion. He also expects Royal Caribbean's strategy of moderate yield growth and strong cost control to result in significant EBITDA margin expansion, reaching 47.8% by 2027.
Finally, Boss views Royal Caribbean as a top-tier player in its sector due to its industry-leading net promoter scores, competitive portfolio of destinations, stronger cost discipline, and ability to reduce leverage through EBITDA growth and free cash flow generation.
Overall, the analyst's report paints a positive picture for Royal Caribbean Cruises, with strong demand, strategic initiatives, and potential for market share growth driving his bullish outlook.