This is reflected in the brokerage's 'outperform' (buy) rating for RCL.
Wells Fargo referred investors to its Nov. 16 research note, which raised Royal Caribbean's valuation range to $107 to $112, from $102 to $107. That is based on a 17 to 17.8 price to earnings multiple of the brokerage's 2016 earnings per share estimate for RCL of $6.29 and a 13.6 to 14 multiple of its enterprise value to EBITDA estimate of $11.58.
That note expressed Wells Fargo's view that Royal Caribbean is well positioned as the No. 2 global cruise player in a consolidated industry with high barriers to entry and solid growth prospects thanks to favorable demographics and low penetration of the vacation market.
'The mix of Oasis-, Solstice- and Quantum-class ships should improve net yields and leverage costs. A lower cost structure, international expansion and 4% to 5% industry capacity growth through '18 should also benefit operating results, allowing for deleveraging and modest multiple expansion,' Wells Fargo analyst Tim Conder said in that November note.
