Royal Caribbean Cruises Sets Sail For Success, Analyst Praises Yield Outlook, CocoCay Investments

Credit Suisse analyst Benjamin Chaiken reiterated an Outperform rating on the shares of Royal Caribbean Cruises Ltd RCL and raised the price target from $100 to $104.
The cruise line operator reported a Q1 sales growth of 172.4% to $2.88 billion, beating the consensus of $2.82 billion.
The analyst said that topline demand was better than expected and net cost controls were on display, generating significant operating leverage.
Net cruise costs were better than expected and was up only 5.2% versus 8.3% expectations.
The analyst noted bookings had outpaced ‘19 levels by a very wide margin through 1Q and into April.
RCL noted significantly higher pricing with strength in Caribbean.
The analyst opined that the company’s yield outlook for Q2 at about 10% is directionally better than its peers.
The analyst thinks RCL should benefit from CocoCay in ‘23, which will cater to about 3 million guests, versus about 1 million in 2019.
Royal Beach Club is potentially the next needle moving investment, adjacent to Atlantis in Nassau, accommodating a similar capacity to Hideaway (~1 million guests annually), opening in ‘25.
The analyst believes the return of China to the scene can increase supply and will likely be a tailwind in 2025.
Price Action: RCL shares are trading higher by 5.22% at $75.63 on the last check Friday.

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