Royal Caribbean Cruises Ltd. RCL shares have lost 12.6% in the past month compared with the industry and the S&P 500’s declines of 13.2% and 5.5%, respectively. Consequently, the company’s shares are now trading 31% below the 52-week high of $277.08.

The recent decline can be primarily attributed to the recent tariff war. The cruise industry’s recent decline can also be attributed to comments from Commerce Secretary Howard Lutnick, which have ignited fresh concerns, as he questioned the cruise industry’s reliance on foreign-flagged vessels to sidestep U.S. taxes. This news also impacted other cruise stocks like Carnival Corporation & plc CCL and Norwegian Cruise Line Holdings Ltd. NCLH.

Price PerformanceZacks Investment Research

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Then again, high operating costs have been concerning for the company. In the fourth quarter 2024, total cruise operating expenses amounted to $2.05 billion, up 8.6% year over year. The company anticipates fuel and food costs to be elevated for some time. More extensive maintenance schedules for key ships are limiting capacity growth in certain quarters. Our model predicts total operating expenses in 2025 to rise 3.8% year over year to $8.98 billion.

However, RCL shares have gained 51.2% in the past year against the industry’s decline of 7.2%. Despite this short-term pullback, RCL’s strong fundamentals remain intact.

Royal Caribbean Trades at a Discount

RCL is currently priced at an attractive discount relative to its industry, with a forward 12-month price-to-earnings (P/E) ratio of 12.37, below the industry average. However, the stock is trading at a premium compared with other industry players like Carnival and Norwegian Cruise.

RCL’s P/E Ratio (Forward 12 Months)Zacks Investment Research

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Royal Caribbean’s Fundamental Remain Strong

The company is navigating well with its record-setting booking driving its growth. Booking trends remain robust across all products and global markets, particularly in North America. Royal Caribbean is experiencing strong booking momentum in 2025, with reservations accelerating since the last reported quarter’s earnings call, marking the best five-week booking period in its history. Demand remains robust across all key products, with bookings consistently outpacing the previous year.

Royal Caribbean’s advance purchase deposits are higher than in the prior years, enabling strategic pricing and yield optimization. Additionally, its direct-to-consumer channels are thriving, supported by expanded digital capabilities that cater to growing consumer preference for online engagement. Travel partners are also contributing significantly, generating higher bookings at elevated rates and reinforcing the company's strong commercial positioning.

RCL’s growth strategy also leans heavily on its expanding fleet of innovative ships and unique destination experiences. The launch of the latest ships, including Icon of the Seas, Utopia of the Seas and Silver Ray, alongside investments in private destinations like Perfect Day Mexico and beach clubs in Nassau and Cozumel, enhances guest experience and competitive positioning.

Following the massive success of Icon of the Seas, the company has unveiled plans for a fourth Icon-class ship, which is set to join the fleet in 2027. Icon-class ship Icon’s impressive performance in guest satisfaction and financial returns underscores the brand's ability to innovate and deliver premium experiences. Anticipation is also building for the launch of Star of the Seas in mid-2025 and Celebrity Cruises’ Celebrity Excel later that year. A seventh Oasis-class ship is scheduled for 2028.

Royal Caribbean continues to use digital tools for marketing, product development and enhancing the consumer experience. These include revamped websites, new vacation packaging capabilities, support for mobile apps and increased bandwidth onboard to help its guests remain well-connected while at sea.

Story Continues

RCL Estimate Revisions

In the past 7 days, analysts have trimmed their estimates for the current and the next years by 0.2% to $14.83 and 0.5% to $17.20, respectively. These estimates indicate year-over-year growth rates of 25.7% and 16%, respectively. Then again, Carnival and Norwegian Cruise’s 2025 earnings are estimated to witness year-over-year growth of 30.3% and 14.3%, respectively.Zacks Investment Research

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The Zacks Consensus Estimate for 2025 and 2026 sales are pegged at $17.95 billion and $19.71 billion, suggesting 8.9% and 9.8% year-over-year growth, respectively.

Final Words on Royal Caribbean

RCL continues to demonstrate strong underlying business momentum, supported by record bookings, robust consumer demand across markets, and fleet expansions that enhance guest experience and long-term profitability.

However, despite Royal Caribbean’s solid fundamentals and brand strength, the stock has recently come under pressure due to regulatory uncertainty sparked by government scrutiny and broader market volatility. Rising operating costs and slightly lowered earnings forecasts also signal near-term challenges.

While the company remains well-positioned for growth, the recent pullback and lingering macro risks suggest that existing investors may benefit from holding their positions. In contrast, new investors might consider waiting for greater clarity on regulatory and cost pressures before entering. Royal Caribbean currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Carnival Corporation (CCL):Free Stock Analysis Report

Royal Caribbean Cruises Ltd. (RCL):Free Stock Analysis Report

Norwegian Cruise Line Holdings Ltd. (NCLH):Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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