Buy This Stock Under $85 with a Trading Target of $100

Royal Caribbean Cruises Ltd (NYSE:RCL): Royal Caribbean is the second largest cruise ship company, with 44 ships operating mostly under the brands of Royal Caribbean International and Celebrity Brands.

Until yesterday, Standard & Poor’s rated RCL stock as “High Risk,” but S&P Global Ratings has issued a revised rating outlook to “Positive” from “Stable” because of management’s intention to sustain adjusted leverage at below 3.5X.

They will make this a corporate priority over share repurchases until the company is able to sustain that level of debt.

To meet this goal, there will be no new ship deliveries in 2017.

S&P (Global Ratings) expects RCL to use most of its discretionary cash flow to repay debt with the focus to achieve an investment grade rating.

On Nov. 1, S&P reiterated its four-star “Buy” opinion, maintaining a 12-month target of $95.

In that report, they raised their 2016 EPS estimate to $6.10 per share (up 5 cents) and cut 2017’s by 9 cents to $6.91. The new report could, in my opinion, result in a positive revision of 2017’s earnings estimate and price target.

RCL topped at over $103 in January 2016 but fell through its 200-day moving average before establishing a low at about $65. That low evolved into a triple bottom that served as a base for the current rally that began in September. The bottom was confirmed by a breakaway gap in October and a golden cross in November.

Since the breakaway gap, RCL stock has traced a narrow bull channel with a spread of just three to four points from support to resistance.

Since RCL closed yesterday near the support line, buy under $85 for a trading target of $100 for a proposed gain of over 17%.

— Sam Collins, Trade of the Day

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Source: Investor Place



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