Bank of America analyst Andrew Didora believes that the recent drop in Royal Caribbean's stock price is not justified, citing strong travel demand and a positive outlook for the cruise industry.
Despite concerns over rising oil prices and their impact on consumer spending, Didora noted that travel spending has been growing in the mid- to high-single digits since February, with cruise spending accelerating to mid-teens growth in July and August.
He highlighted that Royal Caribbean's recent conference indicated steady demand and projected a 4% net yield growth for the fourth quarter of 2026, which is the strongest in the industry. Additionally, the company's recent decision to acquire a 50% stake in the Sandals resort chain could enhance its growth potential, potentially increasing EBITDA by low- to mid-teens percentages.
While macroeconomic pressures pose risks, Didora emphasized that rising interest rates typically do not affect Royal Caribbean's stock performance. Following the upgrade, shares of Royal Caribbean rose by 1%, and Deutsche Bank also raised its rating to 'buy', further supporting the positive sentiment around the stock