Investing.com -- Jefferies upgraded cruise operator Royal Caribbean Cruises Ltd to "buy" from "hold" on Thursday and raised its price target to $330 from $305, saying it now expects 2027 net yields to grow 3.3% versus 2.9% previously.

The shares closed at $282.32 the previous day. Jefferies’ $330 base case implies a 17% gain over 12 months.

The higher yield forecast rests on better occupancy, stronger spending onboard and modest ticket price gains, Jefferies said. Wall Street analysts expect 3.1% growth for 2027, according to the report.

Jefferies also pointed to Royal Caribbean’s joint venture with Sandals, a $3.0 billion transaction. It expects the venture to add about $159 million of equity investment income in 2027, equal to $0.59 per share in adjusted earnings. Its estimates include no savings or other benefits from combining the businesses, which it said should come later.

Jefferies said the deal-related increase in debt would weigh modestly on near-term EPS, cutting its 2027 adjusted EPS forecast to $20.80 from $21.04 as higher depreciation and interest costs offset the benefits. Its forecast remains above Royal Caribbean’s “$20+” guidance and the $20.33 Wall Street consensus.

Jefferies raised its 2027 adjusted EBITDA forecast to $8.70 billion from $8.66 billion. The consensus is $8.51 billion.

Fuel remains a cost pressure. Jefferies now models 2027 fuel expense at $1.45 billion, up from $1.25 billion in its prior forecast. It said fuel costs look closer to a peak than a trough, though Middle East dynamics remain fluid.

Its fuel price assumptions for 2026 and 2027 exceed the 2022 peak after the Russia-Ukraine war, even after adjusting for inflation.

For the third quarter, Jefferies forecasts adjusted earnings of $6.26 per share, down from $6.30, again on slightly higher depreciation and interest costs. That compares with the consensus of $6.36 and company guidance of $6.31. It expects revenue of $5.58 billion.

Jefferies said Royal Caribbean trades below 13x its current next-12-month EV/EBITDA, a measure of company value against operating profit, and below 12x on 2027 estimates. It said the stock has rarely been cheaper since March 2025. The price target now uses a 12.5x multiple, up from 12x.

Jefferies named the stock its best buy heading into the quarter. Its downside scenario puts the shares at $191 and its upside scenario at $460. It listed managing debt, the move into river cruising and global ship deployment as key risks.

The broker also kept Norwegian Cruise Line Holdings at "hold" with a $17 target and Viking Holdings at "buy" with a $112 target. It raised Lindblad Expeditions’ target to $32 from $29 and kept a "hold" rating.

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