Analyst sail into new stock price targets for Royal Caribbean, Norwegian

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

When horse racing enthusiasts hear the word "trifecta," they suspect of the bet where the necessity arises predict which horses will finish first, second and 1/3 in that individual order.

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Nevertheless, the term had so much different which implies for the cruise line operator, which had made good on its three-year financial performance program — earlier than agenda, no less.

Royal Caribbean said it is able to perchance deliver triple-digit adjusted Ebitda per APCD (On hand Passenger Cruise Day) together with double-digit adjusted-earnings per share and return on invested capital within the childhood.

"Lately, I am delighted to share that we've gotten achieved all three trifecta goals on a trailing 12-month basis, 18 months earlier than the agenda," Chief Executive Jason Liberty told analysts at some point of the company's second-quarter earnings call.

"We have got seen an awfully robust booking and pricing environment across all our key itineraries, which is now not handiest setting us up for achievement within the long time periods, but additionally contributed to the outperformance within the second quarter," Liberty said. He added that the company was once reinstating a dividend and raising its full-year guidance.

Norwegian CEO: 'we're witnessing robust demand'

Over at Norwegian Cruise Line Holdings (NCLH) , President and CEO Harry Sommer was once equally jubilant about his company's earnings report.

"The second quarter has surpassed our expectations with results exceeding guidance on all key metrics, allowing us to extend our full-year guidance for the 1/3 time this year." he said. "We are witnessing robust demand with strong pricing and booking volumes, leading to record-breaking progressed ticket sales."

"This demand, coupled with our on-board offering and top of the range service, has led to strong guest satisfaction for us while we continue to effectively control costs," Sommer added.

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Royal Caribbean shares have doubled (up nearly 102%) from a year ago while Norwegian's stock is up nearly forty%.

Overall, the shuttle industry is getting its act together after the crippling Covid-19 shutdown four years ago.

"After falling by 75% in 2020, shuttle is on its on account of a full recovery by the tip of 2024," the consulting firm McKinsey said in a report released in May.

Domestic shuttle is expected to grow Three% every year and reach 19 billion lodging nights per year by 2030, the firm said, while international shuttle should likewise ramp as much as its historical average of 9 billion nights over the identical time period,

Spending on shuttle is expected to follow an identical trajectory with an estimated $eight.6 trillion in traveler outlays in 2024, representing roughly 9% of this year's global GDP, McKinsey said.

"Tourism and hospitality are on a journey of disruption," the report said."Shifting source markets and destinations, growing demand for experiential and luxury shuttle, and innovative business strategies are all combining to dramatically alter the industry landscape."

Truist analyst C. Patrick Scholes raised the firm's price target on Royal Caribbean to $204 from $one hundred seventy five and affirmed a buy rating on the shares as element of a broader research note on cruise lines.

Truist also boosted the pricetag target on Norwegian Cruise Line Holdings to $25 from $21 and maintained a buy rating on the shares.

Analyst: surprise at p.c. of cruise-pricing acceleration

Following the firm's latest discussions with shuttle industry executives and gleaning "big data" on future cruise bookings and pricing, the analyst says pricing for first-1/2 2025 sailings has been accelerating since July, with overall 2025 pricing also “pacing well-earlier than" the Wall Street consensus estimate, Scholes said.

Strong 2025 pricing on the books suggests significant upside to Wall Street's current consensus expectations for cruise stocks, he added.

"This of course assumes no unforeseen adverse circumstances — never a guarantee on this industry," Scholes said.

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Scholes said the biggest observation was once the very strong acceleration in pricing on booked reservations for first-quarter and second-quarter 2025 departures compared with where pricing was once tracking two months ago and, consequently, how a prolonged way above consensus expectations cumulative pricing currently is for 2025.

The analyst noted that "now not handiest we were we surprised how so much pricing accelerated from our prior observations, so were the shuttle executives we speak with."

"We expected to see a value extend around two to some months from departure dates, now not the 5 to 9 months like we observed at some point of the last two months," he added. "That said, our shuttle-industry contacts noted they're going to be very surprised if pricing growth continued to materially accelerate beyond the present levels."

Earlier this month, JP Morgan raised the firm's price target on Royal Caribbean to $213 from $210 and maintained an overweight rating on the shares.

The demand backdrop for cruise remains strong with "zero signs of softening in any lead indicator," the analyst tells investors in a research note after meeting with some management teams within the gap.

The firm says booking-curve commentary points to record visibility into fiscal 2025 with notable strength and multiyear pricing power in both Europe and Alaska.

JPMorgan also raised the firm's price target on Norwegian Cruise Line to $25 from $23 while keeping a neutral rating on the shares.

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

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