Royal Caribbean (RCL) Stock Will Cruise to a 25% Upside

Shares started a strong rally in May that continues today.
By Bruce Kamich ,

NEW YORK (TheStreet) -- I must be the right demographic, because not a week goes by when I don't get one, if not several, sales booklets for cruise lines. And all that marketing must be working, because the chart of Royal Caribbean Cruises (RCL) - Get Report is steaming ahead.

RCL's chart, above, started a strong rally in May that continues with a strong ON-Balance-Volume (OBV) line and trades above the rising 50-day and 200-day moving averages.

This longer-term chart of RCL, above, shows how it has stayed above the rising 40-week moving average with a rising OBV line and a bullish MACD oscillator signal. Based on a point-and-figure chart count, our next price target for RCL is around $125.

TheStreet Ratings team rates ROYAL CARIBBEAN CRUISES LTD as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

We rate ROYAL CARIBBEAN CRUISES LTD (RCL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • RCL's revenue growth has slightly outpaced the industry average of 1.2%. Since the same quarter one year prior, revenues slightly increased by 5.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • 45.03% is the gross profit margin for ROYAL CARIBBEAN CRUISES LTD which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 9.06% trails the industry average.
  • Compared to its closing price of one year ago, RCL's share price has jumped by 47.44%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • ROYAL CARIBBEAN CRUISES LTD has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ROYAL CARIBBEAN CRUISES LTD increased its bottom line by earning $3.42 versus $2.14 in the prior year. This year, the market expects an improvement in earnings ($4.80 versus $3.42).
  • Net operating cash flow has declined marginally to $567.59 million or 1.90% when compared to the same quarter last year. Despite a decrease in cash flow of 1.90%, ROYAL CARIBBEAN CRUISES LTD is still significantly exceeding the industry average of -59.23%.
  • You can view the full analysis from the report here: RCL

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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