Royal Caribbean's Sandals Investment Set to Boost EBITDA Despite Macro Risks, BofA Says

MT Newswires Live
Sep 28

Royal Caribbean (RCL) is a well-positioned travel business with potential for further earnings before interest, taxes, depreciation and amortization growth despite macro risks, BofA Securities said in a note Monday.

The company is investing $3 billion for a 50% stake in Sandals Resorts. The deal is expected to add 3% to 4% to Royal Caribbean's EBITDA initially, the analysts said.

The company could drive significant growth at Sandals by applying its pricing, supply chain, and loyalty program expertise, which could also improve Sandals' margins, the analysts added.

If successful, the analysts estimate the venture could grow EBITDA in the low- to mid-teens through 2030, reaching Sandals EBITDA of about $900 million from $600 million currently.

"The macro is a risk, but travel spend has been very strong, estimates seem reasonable, and RCL is well positioned to capture further travel share," the analysts added.

BofA upgraded Royal Caribbean to buy from neutral and maintained its $330 price target.

Price: 242.51, Change: -0.19, Percent Change: -0.08

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