On Wednesday, Goldman Sachs (NYSE:GS) began coverage on shares of Royal Caribbean Cruises (NYSE:RCL), assigning a Buy rating and setting a price target of $162. The firm highlighted the cruise operator's superior execution and potential for pricing advantages.
Royal Caribbean is currently focused on enhancing its fleet, with plans to introduce several new "megaships." These ships are expected to contribute approximately double the earnings before interest, taxes, depreciation, and amortization (EBITDA) compared to older vessels, thus improving the company's return on capital.
The introduction of the Icon (NASDAQ:ICLR) of the Seas is anticipated to increase net yields by roughly 2% in 2024, according to Goldman Sachs' estimates. Additionally, the expansion of CocoCay, the cruise line's private island destination, is projected to further boost net yields by 1%.
Goldman Sachs suggests that these strategic moves will position Royal Caribbean to reach investment-grade (IG) financial metrics by the end of 2024. This progress, in turn, is expected to enhance the company's narrative around capital returns, potentially serving as a catalyst for the stock in 2025.
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