S&P lowered Royal Caribbean (RCL) to Buy from Strong Buy

S&P lowered Royal Caribbean (NYSE: RCL) to Buy from Strong Buy, in the Mar.17, edition of Outlook. However, S&P raised their price target from $28 to $30. A little after the fact, since the stock is trading at $31.00 The stock has had a nice little run recently, it’s up 20% year to date.

“In our view, news of a competitor’s plan to raise prices for summer sailings helped lift investor sentiment. However, we argue that rising capacity and the fragile state of consumer spending in the United States and Europe will be a pricing challenge."

"Also, in our view, further increases in already rising oil prices would be a negative. We think improving consumer confidence and the lure of all inclusive value-vacations has led to renewed interest in cruising. On higher profit estimates, we raised our multiple-based, 12-month target price to $30 from $28.”

Reuters reported today, that Norwegian Cruise Line is raising prices up to 7%, effective April 2. That’s in addition to the 5% price rise that Carnival Cruise enacted for some summer cruises. Keep the price rise in context since the cruise lines had already lowered prices 10 to 20% over the last few years.

Apparently, new ships that were ordered before the recession are adding to the supply of ships, which will make price rises harder to stick. But the cruise lines are anticipating better days ahead. Ain’t we got fun!