Last Update 11 Dec 25

Fair value Decreased 1.50%

RCL: Reset 2026 Guidance Will Unlock Upside From Conservative Earnings Outlook

Analysts have nudged down their Royal Caribbean Cruises price target by about $5 per share, reflecting slightly higher discount rates and more conservative long term earnings and yield assumptions, even as they still expect robust EPS growth through 2028.

Analyst Commentary

Analysts are recalibrating their views on Royal Caribbean Cruises following the latest earnings update, trimming price targets but generally maintaining expectations for solid medium term growth and balance sheet progress.

Bullish Takeaways

Bullish analysts highlight Royal Caribbean's newer fleet and premium hardware as key drivers of yield outperformance, supporting a projected mid to high teens EPS compound annual growth rate through 2028.
Several models view the initial 2026 EPS guidance as conservative relative to the company’s earnings algorithm of low to mid single digit yield growth and low single digit cost growth, leaving room for upside versus current consensus.
The recent share price pullback after earnings is seen by some as a reset in expectations that improves the risk reward profile, allowing investors to enter at more attractive valuation multiples relative to anticipated EPS growth.
Booking and pricing data, while no longer pointing to large upside surprises, still supports the view that Royal Caribbean can meet current earnings and deleveraging targets, underpinning confidence in execution on its long term growth plan.

Bearish Takeaways

Bearish analysts point to a sharper than expected slowdown in revenue yields and 2026 EPS guidance below prior market expectations as justification for lowering price targets and trimming earnings forecasts.
There is increased concern that visibility into yields and pricing has diminished, reducing confidence in near term upside to estimates and warranting more conservative valuation multiples.
Some commentary frames the recent EPS beat as more cost driven than demand driven, which raises questions about how repeatable the margin performance is if pricing momentum continues to moderate.
Mixed trends in forward bookings and pricing data contribute to a more cautious stance on the potential for Royal Caribbean to significantly outperform current Street expectations in the near term, even if longer term growth remains intact.

What's in the News

Stifel lowered its Royal Caribbean price target to $400 from $420 and reiterated a Buy rating, arguing the market has overreacted to recent earnings and that 2026 EPS guidance appears very conservative, leaving room for upside to consensus (Stifel note).
Royal Caribbean's board authorized a new share repurchase plan, with the company announcing it can buy back up to $2 billion of its common stock, signaling confidence in future cash generation and valuation (company announcement).
The company detailed a next level lineup of 2027 to 2028 Caribbean vacations, including new itineraries on Star of the Seas, Harmony of the Seas, Utopia of the Seas, Wonder of the Seas and Radiance of the Seas, along with expanded beach club offerings in The Bahamas and Mexico (product announcement).
Royal Caribbean reported third quarter 2025 operating results showing a load factor of 112 percent and higher passenger counts and cruise days year over year, underscoring still elevated demand and strong occupancy trends (earnings release).
The company updated investors on its existing buyback, noting it repurchased more than 1.27 million shares for $414.13 million in the third quarter, bringing total repurchases under the February 2025 program to 2.28 million shares for $643.93 million (buyback update).

Valuation Changes

The fair value estimate has edged down slightly, from about $336.08 to $331.04 per share, reflecting modestly more conservative assumptions.
The discount rate has risen slightly, from roughly 8.98 percent to 9.08 percent, increasing the required return applied in the valuation model.
Revenue growth has ticked down marginally, from approximately 9.33 percent to 9.32 percent, indicating a very small reduction in long-term topline expectations.
The net profit margin has remained effectively unchanged at about 25.92 percent, implying virtually identical profitability assumptions.
The future P/E has declined modestly, from around 20.84x to 20.60x, suggesting a slightly lower multiple applied to forward earnings.

New ships and enhanced experiences are boosting revenue through higher onboard spending and pre-cruise purchases, driving per-passenger spend growth.
Strong financial management, loyalty programs, and moderate capacity growth initiatives position the company for long-term market share and revenue growth.
Heightened macroeconomic uncertainty and potential consumer spending decline risk impacting Royal Caribbean's revenue, margins, profitability, and competitive pricing ability.

Catalysts

About Royal Caribbean Cruises

Operates as a cruise company worldwide.What are the underlying business or industry changes driving this perspective?

The introduction of new ships like Star of the Seas and Celebrity Xcel, coupled with existing fleet performance, is expected to drive yield growth between 2.6% and 4.6% in 2025, positively impacting revenue and earnings.
Enhanced guest experiences, investments in private destinations, and new ships are driving higher onboard spending and pre-cruise purchases, which should support revenue growth by increasing per-passenger spend.
The company's financial position, characterized by investment-grade ratings, strong cash flow generation, and a focus on maintaining a flexible balance sheet, positions the company to effectively manage costs and improve net margins.
Royal Caribbean's continued focus on loyalty programs, which have increased customer retention and spending, suggests long-term revenue enhancement as repeat visitors book more frequently and spend more per trip.
Moderate capacity growth initiatives, including the ongoing introduction of game-changing ships and expansion of exclusive destinations, aim to capture market share in the $2 trillion vacation market, supporting long-term revenue and EPS growth.

Royal Caribbean Cruises Earnings and Revenue Growth

Royal Caribbean Cruises Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Royal Caribbean Cruises's revenue will grow by 9.2% annually over the next 3 years.
Analysts assume that profit margins will increase from 21.0% today to 26.2% in 3 years time.
Analysts expect earnings to reach $5.9 billion (and earnings per share of $22.34) by about September 2028, up from $3.6 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $5.2 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 21.7x on those 2028 earnings, down from 26.0x today. This future PE is lower than the current PE for the US Hospitality industry at 23.9x.
Analysts expect the number of shares outstanding to grow by 1.02% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.97%, as per the Simply Wall St company report.

Royal Caribbean Cruises Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The heightened uncertainty in the macroeconomic environment presents a risk that could impact consumer behavior and spending, potentially affecting Royal Caribbean's future revenue and earnings.
Continued dependence on consumer discretionary spending, which may decline in an economic downturn, could pressure pricing and onboard spending, impacting revenue and net margins.
Although recent trends are positive, the risk of a potential slowdown in close-in bookings remains a concern, which could affect the company's yield and overall profitability if consumer confidence weakens further.
Royal Caribbean's ability to maintain price integrity amidst varying market conditions could face challenges, risking future yield growth and revenue generation should competitive pricing pressures intensify.
Uncertainties around currency exchange rates and fuel prices, while currently favorable, could reverse and adversely impact the company’s earnings and operational costs, affecting overall profitability.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $351.652 for Royal Caribbean Cruises based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $420.0, and the most bearish reporting a price target of just $218.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $22.4 billion, earnings will come to $5.9 billion, and it would be trading on a PE ratio of 21.7x, assuming you use a discount rate of 9.0%.
Given the current share price of $345.31, the analyst price target of $351.65 is 1.8% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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