Royal Caribbean Is Down 20% From Its 52-Week High. Is the Dip Worth Buying?

Royal Caribbean Is Down 20% From Its 52-Week High. Is the Dip Worth Buying?

Rick Munarriz, The Motley Fool

Mon, August 24, 2026 at 7:08 PM GMT+3 4 min read

• RCL -0.58%
• NVDA -2.01%

The ocean cruising industry can use a lifeboat. All three of the largest players are currently sporting double-digit percentage declines over the past year. Royal Caribbean (NYSE: RCL) -- the second-largest operator by revenue but the largest by market cap -- is faring the best with its 14% decline. The stock is also down 20% from last summer's all-time high.

The overall market is naturally higher at that time. The industry that seemed so resilient a year ago -- one of the more impressive turnaround stories in the travel sector -- is starting to take on water.

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Let's take a look at the momentum reversal at Royal Caribbean and then head to the port of potential opportunity.

Crashing waves

Royal Caribbean led the way out of the COVID-19 crisis. After having to shut down most of its operations for more than a year -- and a gradual ramp-up of its sailings -- Royal Caribbean became the first to achieve full-year profitability in 2023. It was also the first cruise line to reinstate its quarterly dividend.

The initial surge in pent-up demand would eventually cool down. It happened to other travel stocks that didn't face the same regulatory obstacles the cruise lines did.

However, this year's war with Iran has hurt Royal Caribbean in two substantial ways. The biggest culprit is the rise in oil prices, a major cost component on sailings. Harder to quantify, a second obstacle is the rising concern about safety. The lion's share of Royal Caribbean's sailings takes place in the sunny Caribbean, far from the contentious Strait of Hormuz, but it's still a potential detriment to bookings.

Royal Caribbean's latest quarter was a mixed bag. Revenue rose a modest 6%, its second-weakest top-line growth since resuming operations five years ago. Adjusted earnings declined for the first time since returning to profitability, held back by an 11% jump in operating expenses. Higher fuel prices, as well as rising food and labor costs, led to a contraction in margins.

Opportunity is knocking on your cabin door

The quarter wasn't as bad as it could've been. Royal Caribbean actually raised its earnings guidance following the report. It did pare back its full-year revenue target, but demand remains buoyant. Bookings for next year remain ahead of historical levels.

Royal Caribbean's outlook for all of 2026 calls for revenue to climb 9%. Even after the step back on the bottom line in the second quarter, Royal Caribbean is targeting adjusted earnings per share between $17.73 and $17.87, a 14% increase at the midpoint.

The growth forecast is impressive, especially heading into the third quarter, seasonally the strongest for the industry. The business keeps growing, notching record highs even if the stock can't. Trailing revenue is up 71% from its pre-pandemic 2019 peak. Net income has more than tripled.

You can buy Royal Caribbean for 16 times the midpoint of this year's adjusted earnings guidance. The stock's dividend -- raised four times since being reinstated -- yields a respectable 1.7%. Capital appreciation remains the ultimate goal, but the quarterly distributions will help patient investors ride out the current correction storm.

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Rick Munarriz has positions in Royal Caribbean Cruises. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Royal Caribbean Is Down 20% From Its 52-Week High. Is the Dip Worth Buying? was originally published by The Motley Fool