There’s another reason to be bullish on Royal Caribbean, according to several Wall Street analysts. The cruise line held an investor conference for its latest megaship, Icon of the Seas, over the weekend, and the response was positive. The ship will officially debut on January 27th. Morgan Stanley analyst Jamie Rollo calls Icon of the Seas a “record-breaking spectacle of the highest order” and believes it will be a big driver of profits. Icon of the Seas has 40 restaurants and bars, six water slides, seven pools, an ice skating rink, and areas designed for families with young children. The company also added Hideaway Beach, a new adults-only land destination with an infinity pool, bar, restaurant and cabanas. Rolo’s Channel Check initially suggested Icon of the Seas would carry a 40% premium on ticket prices compared to the rest of Royal Caribbean’s brands, but that has now risen to more than 100%. This means the yield will be at a 50% premium to Royal Caribbean’s broader fleet, Rollo wrote in a note Monday. He also estimates that the cost efficiency of giant ships will increase by 10%. “This means Icon is generating approximately $220 in EBITDA/APCD, more than double the group average (nearly triple the operating profit line),” Rollo said, adding that the cruise industry’s production capacity He referred to the available passenger cruise days (APCD), which is an indicator of Morgan Stanley has an equal weight rating for Royal Caribbean. “This is $500 million of full-year EBITDA, more than 10% of group EBITDA, more than double our shipping capacity share, and alone driving just over half of the consensus forecast for FY24 profit growth.” writes the analyst. RCL 1Y Mountain Royal Caribbean’s One Year Achievements This is also another step for Royal Caribbean to capitalize on the ongoing trend of multi-generational travel. “RCL spends a lot of time understanding how couples, children, teens, families, and ultimately multigenerational families enjoy vacations, both separately and together. Icon is the best embodiment of what we’ve learned so far.” Citi analyst James Hardiman said in a note Monday. He rates the stock a “buy” and has a price target of $148, implying an upside of nearly 17% from Monday’s closing price. Meanwhile, JPMorgan believes Royal Caribbean is well placed to benefit from the growing demand for cruise travel on a macroeconomic level and from steps it has taken to add new land-based attractions to its megaships and private islands on a microeconomic level. I believe that I am in a good position. “It’s important that management continues to grow the brand across each customer segment (multi-generational travel) and focus on investing in land destinations,” analyst Matthew Vos said in a note Monday. It’s about being there,” he said. He rates the stock “overweight” and has a price target of $143, implying an upside of about 13% from Monday’s closing price. UBS analyst Robin Farley said the Icon exceeds the capacity, amenities and onboard revenue opportunities of Royal Caribbean’s previous ships. “Their research shows that families withdraw their children from school until grade 4, so RCL aims to strengthen the shoulder period during the school holidays,” she said. Meanwhile, the new Hideaway Beach adds 30% capacity to Royal Caribbean’s private island investments, which is a major driver of the cruise line’s ticket prices and onboard spending, she noted. “While RCL is focused on developing the Royal Beach Club in the Bahamas, we believe that brand growth will be a priority and we anticipate that RCL may announce new vessel orders at some point this year.” further increases,” Farley said. The stock has a buy rating and a price target of $140. —CNBC’s Michael Bloom contributed reporting.
Wall Street bullish on Royal Caribbean’s new ship ‘record-breaking spectacle’
