The latest analyst coverage could presage a bad day for Royal Caribbean Group (NYSE:RCL), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.
Following the downgrade, the current consensus from Royal Caribbean Group's 13 analysts is for revenues of US$3.0b in 2021 which - if met - would reflect a major 36% increase on its sales over the past 12 months. Before the latest update, the analysts were foreseeing US$2.9b of revenue in 2021. So there's been a pretty clear uptick in analyst sentiment after this consensus update, given the small increase to this year's revenue forecasts.
The consensus price target rose 12% to US$82.64, with the analysts clearly more optimistic about Royal Caribbean Group's prospects following this update. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Royal Caribbean Group, with the most bullish analyst valuing it at US$117 and the most bearish at US$50.00 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. One thing stands out from these estimates, which is that Royal Caribbean Group is forecast to grow faster in the future than it has in the past, with revenues expected to display 36% annualised growth until the end of 2021. If achieved, this would be a much better result than the 2.8% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 23% per year. Not only are Royal Caribbean Group's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.
The Bottom Line
The most important thing to take away from this upgrade is that analysts lifted their revenue estimates for this year. Analysts also expect revenues to grow faster than the wider market. There was also an increase in the price target, suggesting that there is more optimism baked into the forecasts than there was previously. Given the stark change in sentiment, we'd understand if investors became more cautious on Royal Caribbean Group after today.
As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Royal Caribbean Group's financials, such as dilutive stock issuance over the past year. Learn more, and discover the 2 other concerns we've identified, for free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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