Why Royal Caribbean Cruises Ltd. Stock Rose Today

What happened

Shares of Royal Caribbean Cruises Ltd. (NYSE: RCL) were riding a rising tide today after the company announced an acquisition, taking a majority stake in luxury cruise line Silversea Cruises. As a result, the stock closed up 5.1%.

Image source: Royal Caribbean.

So what

Royal Caribbean said it would take a two-thirds stake in Silversea for about $1 billion, which gives it exposure to growth areas in luxury and expedition cruising. Silversea has nine vessels, with its largest ship holding 600 passengers; its executive chairman Manfredi Lefebvre D’Ovidio and CEO Roberto Martinoli will continue in their current roles as Royal Caribbean becomes the majority owner.

Royal Caribbean CEO Richard Fain said: “Silversea is a crown jewel, and the acknowledged leader in luxury and expedition cruising, two key markets that are poised for growth. Uniting our two companies presents an extraordinary opportunity to expand vacation options for guests and create revenue in strategic growth areas.”

Now what

Silversea joins Celebrity Cruises, Azamara Club Cruises, TUI Cruises, Pullmantur, and SkySea Cruises as brands that Royal Caribbean, the No. 2 cruise operator, either owns outright or has a significant stake in.

It’s easy to see why the market likes the deal. Royal Caribbean’s marketing engine and investment dollars should help grow Silversea’s capacity and revenue, and the brand gives it a stake in the ultraluxury market. Royal Caribbean shares have more than tripled over the last five years, and the company recently raised its full-year earnings guidance to between $8.70 and $8.90, giving the company a modest price-to-earnings ratio of 13.

With the global economy strong and more boomers retiring, Royal Caribbean stock could continue to outperform.

10 stocks we like better than Royal Caribbean
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now… and Royal Caribbean wasn’t one of them! That’s right — they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of June 4, 2018

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

You May Also Like

About the Author: Over 50 Finance