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With COVID-19 restrictions no longer a headwind for the tourism industry, experts believe 2023 will be the year of so-called “revenge travel,” in which the pent-up demand from recent years is fully unleashed, asserts growth stock expert Mike Cintolo, editor of Cabot Top Ten Trader.

Royal Caribbean (RCL) is the world’s third-largest cruise line by annual revenue, and despite signs that consumers are pulling back on discretionary spending, the company says people are still willing to pay up for cruises.

Indeed, a survey conducted by a major Wall Street bank found that bookings for Royal Caribbean and its key competitors are higher than the pre-pandemic levels of 2019, concluding that Royal Caribbean would likely outperform its peers on the top and bottom lines this year.

Earlier this month, the firm’s Q1 results featured a head-turning 173% increase in revenue to nearly $2.9 billion (the reason for the stock’s strength), and while earnings were in the red, they still still exceeded estimates by a huge 46 cents.

The rosy results significantly exceeded the company’s guidance, thanks to strong close-in bookings at higher prices, continued strength in on-ship spending, and favorable timing of operating costs during “Wave Season,” the period between January and March when cruise lines typically offer discounted rates.

Probably more important was that the top brass said it was “pleasantly surprised” how quickly cruise demand accelerated above historical trends and at higher rates — a development it sees continuing as consumer spending shifts further toward experiences.

As a result of its record-breaking Wave Season, Royal Caribbean guided for adjusted EBITDA this year to “significantly exceed” the prior record achieved in 2019, with earnings expected to explode well above $4 this year and continue higher into 2024.

Technically, RCL fell from around $100 in 2021 to a low of $31 last year before rallying choppily back into the $75 area earlier this year. Shares did fall quickly in March when the banking crisis hit, but RCL has powered back to its recent highs after earnings. We’ll put our buy range down a bit from here as the stock still has some resistance to chew through.

About the Author

During his more than ten years at Cabot, Michael Cintolo has uncovered exceptional growth stocks and helped to create new tools and rules for buying and selling stocks. Perhaps most notable was his development of the proprietary trend-following market timing system, Cabot Tides, which has helped Cabot place among the top investment newsletters numerous times. 

Cabot Growth Investor has been consistently recognized for outstanding performance by Hulbert Financial Digest and Timer Digest. It is one of Hulbert's top five newsletters for five-year risk-adjusted performance with a 13.2% annualized return as of June 30, 2011. It is also ranked among the Top Ten Newsletters by Timer Digest for long-term performance.

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