Royal Caribbean: Cruise Stock to Buy and Hold or Just a Cyclical Trade?​

Core Viewpoint - Royal Caribbean is positioned favorably for long-term investment due to its strong performance and market dynamics, despite competition from newer entrants like Viking Holdings [1][10]. Company Performance - Royal Caribbean reported a remarkable 112% occupancy rate in Q3 2025, indicating robust demand for cruise vacations [2]. - The company achieved over $3.5 billion in net income during the first nine months of 2025, reflecting a 51% year-over-year increase [3]. - Royal Caribbean has effectively managed its $21 billion debt from the pandemic, using increased profits to service and reduce this debt [3]. - The cruise line has launched the Star of the Seas in 2025 and plans to introduce three additional ships over the next three years to meet strong demand [3]. Market Position - Royal Caribbean's market capitalization stands at $78 billion, which is twice that of its larger competitor, Carnival [6]. - The company has outperformed the S&P 500 over the last five years, showcasing its strong market position [4][10]. - Royal Caribbean's P/E ratio is 18, which, while higher than Carnival's 16 and Norwegian Cruise Line's 14, remains significantly lower than the S&P 500 average of 31 [6]. Competitive Landscape - Viking Holdings has emerged as a significant competitor, targeting high-end cruisers with smaller, experience-oriented ships, capturing over 4% of the industry's revenue with less than 1% of cruise passengers [7]. - Since its IPO in May 2024, Viking has outperformed all cruise line stocks, with a P/E ratio of 32, indicating a willingness among investors to pay a premium for its stock [8]. - Despite the competition from Viking, Royal Caribbean is expected to continue outperforming the S&P 500 [11].