Royal Caribbean Group made a clear move above a cup-with-handle buy point Monday morning. The cruise line stock, today's IBD 50 Growth Stocks to Watch pick, is on pace for its fourth straight gain and reached a new high as demand remains strong.
On Monday, the cruise line operator announced a $1 billion private offering of senior notes, with the proceeds to be used to pay down various debts.
Also Monday, JPMorgan raised its price target to 213 from 210 and maintained its overweight rating on Royal Caribbean stock.
The company, along with rivals Carnival and Norwegian Cruise Line, is investing in shorter excursions of three- to four-day trips, attempting to appeal to young cruisers, according to the Wall Street Journal. At Royal Caribbean, one in two passengers is a millennial or younger, said Royal Caribbean Chief Financial Officer Naftali Holtz.
As a sign of growing demand, on Aug. 27 Royal Caribbean announced it ordered a fourth Icon-class ship for delivery in 2027 with options to build two more. The first ship in the Icon class launched in January, with the next ship in the series to launch in 2025 and another in 2026.
"We are leading the vacation industry in developing new experiences for our guests to create lifelong memories, and we continue dreaming and evolving to deliver more ways to chill and thrill," said Michael Bayley, president and CEO of Royal Caribbean International.
Royal Caribbean Stock Sails To A Buy Zone
Although it's a late-stage base, the company's outlook could extend the stock's already long advance.
Royal Caribbean stock broke out of a V-shaped cup-with-handle base with a 169.47 buy point Monday. Shares are in the 5% buy zone that extends to 177.94, according to MarketSurge chart analysis. The stock is at all-time highs.
Shares dropped 7.6% in heavy volume on July 25, despite a positive report. Shares got caught up in the early-August market sell-off. The stock climbed back and on Wednesday reclaimed its 21-day exponential moving average and its 50-day moving average.
Shares have gained 32% this year so far and have outperformed 92% of stocks the past 12 months, as shown by a 92 IBD Relative Strength Rating.
Earnings Look To Rise 30% In Q3
The cruise line crushed second-quarter adjusted earnings estimates and topped sales views July 25. It also gave third-quarter profit guidance above analysts' projections and raised its full-year 2024 earnings forecasts, also exceeding estimates. In addition, Royal Caribbean reinstated its dividend.
Second-quarter profit grew 76% on 17% revenue growth. Both Q3 and future quarter projections call for slowing earnings and sales growth estimates, following robust 2023 growth. Full-year EPS is expected to rise 70% in 2024 and 17% in 2025.
Mutual funds own 68% of shares, with 1,726 holding Royal Caribbean stock in June, up from 1,630 in March. The stock holds a 93 Composite Rating.
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