Royal Caribbean stock: upside after the Icon of the Seas launch?

Royal Caribbean (NYSE: RCL) stock price has done well since June 2022 as investors cheered the company’s post-Covid-19 recovery. It has jumped by more than 93% in the past 12 months and by over 524% from its lowest point in 2020. The company has outperformed other cruise stocks like Carnival and Norwegian.

Strong growth continues

Royal Caribbean and other cruise companies are doing well as demand for cruises has remained strong in the past few months. Recent data estimates that over 35.7 million people will take cruise trips this year, up from 31.5 million in the previous year. 

Notably, the demographics of cruising are improving, with many young people taking to the sea. In the past, cruises were popular among the elder generation and couples in their honeymoon. As a result, a common phrase describing the industry was that it was for newlywed and nearly dead. 

Royal Caribbean has emerged as a big winner for the cruise industry as the rising demand has pushed it to hike prices. Indeed, media reports say that the biggest challenge in the industry is that there is no enough capacity.

The company is solving the demand issue. Just this weekend, it launched Icon of the Seas, its flagship cruise ship. It is the biggest ship in the world and has a capacity of over 7,000 and is fully booked until 2026. 

The most recent results shows that Royal Caribbean is doing well. Its revenue jumped by 39% YoY in the quarter to over $4.16 billion. This figure was 12% above its guidance and $100 million higher than analysts estimates. Its EBITDA margin improved to 42% while the company boosted its full-year guidance placing a net yield of between 12.9% to 13.9%. 

Royal Caribbean has strong fundamentals, which could help to boost its stock in the near term. For example, it has reduced its total debt to $19.6 billion from $22.9 billion a year earlier. It also has strong liquidity of over $3 billion, helped by the strong business recovery. This explains why it recently received upgrades by S&P and Moody’s.

Further, the company will benefit from the strengthening American economy, which will see more people use its ships. Most importantly, falling inflation means that the company will be able to boost its margins.

Most importantly, Royal Caribbean is a diversified company that captures all types of markets. Its Royal Caribbean brand caters to ordinary people while Celebrity and Silversea Cruises cater to the affluent.

Royal Caribbean stock price forecast

Turning to the weekly chart, we see that the Royal Caribbean share price has been in a strong upward trend in the past few months. It has flipped the important resistance point at $113 into a support. This was an important price since it was its highest swing on July 24th. It has also formed a bullish flag pattern.

The RCL share price has remained above the 50-week and 100-week moving averages. Therefore, the outlook for the stock is bullish, with the next point to watch being $133.78, its highest swing in January 2020 and its all-time high.