Analysts navigate to new share price targets for Royal Caribbean, Norway

The people at Royal Caribbean (Rd) hit the trifecta over the summer and they were nowhere near a racetrack.

When horse racing fans hear the word “trifecta”, they think of the bet where you have to predict which horses will finish first, second and third in the exact order.

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However, the term had a much different meaning for the cruise line operator, which achieved its three-year financial performance schedule – ahead of schedule, no less.

Royal Caribbean said it will deliver triple-digit adjusted Ebitda per Available Passenger Cruise Day (APCD), along with double-digit adjusted earnings per share and return on invested capital in the teens.

“Today, I’m pleased to share that we achieved all three trifecta goals in the last 12 months, 18 months ahead of schedule,” Chief Executive Jason Liberty told analysts during the company’s second-quarter earnings call.

“We saw an incredibly robust booking and pricing environment across all of our key itineraries, which not only sets us up for success in the coming periods, but also contributed to our performance in the second quarter,” Liberty said. He added that the company is reinstating a dividend and raising its guidance for the full year.

An analyst adjusts his price targets for Royal Caribbean and Norwegian Cruise Lines.

Norwegian CEO: “we are seeing strong demand”

At Norwegian Cruise Line Holdings (NCLH) Chairman and CEO Harry Sommer was equally jubilant about his company’s earnings report.

“The second quarter exceeded our expectations, with results beating guidance on all key metrics, allowing us to raise full-year guidance for the third time this year.” he said. “We are seeing strong demand, with strong pricing and booking volumes, leading to record advanced ticket sales.”

“This demand, together with our onboard offering and high-quality service, has led to strong guest satisfaction for us, while we continue to effectively control costs,” added Sommer.

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Shares of Royal Caribbean have doubled (up nearly 102%) from a year ago, while shares of Norwegian are up nearly 40%.

In general, the travel industry is getting its act together after the crippling shutdown of Covid-19 four years ago.

“After a 75% decline in 2020, travel is on track for a full recovery by the end of 2024,” consulting firm McKinsey said in a report published in May.

Domestic travel is expected to grow by 3% annually and reach 19 billion overnight stays per year by 2030, the company said, while international travel should also reach the historical average of 9 billion nights in the same time frame.

Travel spending is expected to follow a similar trajectory, with about $8.6 trillion in traveler spending in 2024, accounting for about 9 percent of global GDP that year, McKinsey said.

“Tourism and hospitality are on a journey of disruption,” the report said. “Changing source and destination markets, growing demand for experiential and luxury travel, and innovative business strategies are combining to dramatically alter the industry landscape.”

Truist analyst C. Patrick Scholes raised the company’s price target on Royal Caribbean to $204 from $175 and affirmed a buy rating on the stock as part of a broader cruise lines research note.

Truist also raised its price target on Norwegian Cruise Line Holdings to $25 from $21 and maintained a buy rating on the stock.

Analyst: Surprise in rate of acceleration of cruise prices

Following the company’s recent discussions with travel industry executives and the gathering of “big data” on future cruise bookings and prices, the analyst says that prices for travel in the first half of 2025 have accelerated since July, overall prices for 2025 , also “beginning long before”. the Wall Street consensus estimate, Scholes said.

Strong prices for 2025 suggest a significant upside to current Wall Street consensus expectations for cruise stocks, he added.

“This, of course, assumes there are no unforeseen adverse circumstances – never a guarantee in this industry,” Scholes said.

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Scholes said the most important observation was the very strong acceleration in prices for bookings booked for departures in the first and second quarters of 2025 compared to where prices were tracking two months ago, and subsequently how much above consensus expectations is the current cumulative price for 2025. .

The analyst noted that “not only have we been surprised by how much prices have accelerated from our previous observations, so have the tourism executives we speak to.”

“We expected to see a price increase in about two to three months from the departure dates, not five to nine months as we have seen in the last two months,” he added. “That said, our contacts in the travel industry have noted that they would be very surprised if price growth continues to accelerate significantly beyond current levels.”

Earlier this month, JP Morgan raised the company’s price target for Royal Caribbean to $213 from $210 and maintained an overweight rating on the stock.

The demand backdrop for cruise remains strong, with “zero signs of abating in any leading indicator,” the analyst told investors in a research note after meeting with some management teams in the space.

The firm says booking curve comments point to record visibility in fiscal 2025, with notable strength and multi-year pricing power in both Europe and Alaska.

JPMorgan also raised the company’s price target on Norwegian Cruise Line to $25 from $23, while maintaining a neutral rating on the stock.

On September 20, Stifel analyst Steven Wieczynski raised his price target on rival cruise line investment firm Carnival (CCI) to $27 from $25 and affirmed a buy rating on the stock. And Mizuho analyst Ben Chaiken raised his price target on Carnival to $25 from $22, while maintaining an outperform rating.

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