Latest Developments:
Royal Caribbean (RCL) posted a strong quarter with a 17.45% year-on-year revenue growth and improved operating margins (33.46%). However, net income margin decreased due to higher interest expenses. RCL raised FY2024 guidance, expecting net yields to grow by 11.4% and capacity to increase by 7.8%. Despite these positive trends, the company faces high financial expenses and its stock seems fully priced.

Investment Case:
RCL continues benefiting from industry tailwinds, including strong demand and fleet expansion. However, margins are already optimized, and the company’s significant stock price increase suggests limited upside potential. Despite positive assumptions, our valuation model shows RCL is overvalued with minimal further growth expected.

Valuation:
Our DCF model suggests an implied share price of $127, with RCL trading at $242, indicating it is overvalued. At a P/E of 25.5x, RCL’s current valuation offers no margin of safety. Investors should explore alternative opportunities with more upside potential.

Disclaimer: The above is an excerpt on a report written by our close associate, Selendis Research. Interested parties may check out the full report here on Seeking Alpha. All information provided is intended solely for general informational purposes. Seven Insights does not take into account individual financial goals or situations and does not provide personalized investment advice. Seven Insights is not a licensed securities dealer, broker, U.S. investment adviser, or investment bank.