Wall Street Analysts Think Royal Caribbean (RCL) Is a Good Investment: Is It?

Core Viewpoint - The article discusses the reliability of Wall Street analysts' recommendations, particularly focusing on Royal Caribbean (RCL), and emphasizes the importance of using these recommendations in conjunction with other research tools like Zacks Rank to make informed investment decisions [1][4]. Brokerage Recommendations - Royal Caribbean has an average brokerage recommendation (ABR) of 1.50, indicating a consensus between Strong Buy and Buy, based on 22 brokerage firms [2]. - Out of the 22 recommendations, 16 are Strong Buy and 1 is Buy, which accounts for 72.7% and 4.6% of all recommendations respectively [2]. Limitations of Brokerage Recommendations - The article highlights that brokerage recommendations may not be reliable indicators of stock price movements due to analysts' vested interests, often leading to a bias towards more favorable ratings [5][9]. - Research indicates that for every "Strong Sell" recommendation, there are five "Strong Buy" recommendations, suggesting a significant positive bias [5]. Zacks Rank as an Alternative - Zacks Rank is presented as a more effective tool for predicting stock price movements, categorizing stocks into five groups based on earnings estimate revisions [7][10]. - The Zacks Rank is timely and reflects the latest earnings estimates, unlike the ABR, which may not be up-to-date [11]. Current Earnings Estimates for Royal Caribbean - The Zacks Consensus Estimate for Royal Caribbean has increased by 3.8% over the past month to $14.89, indicating growing optimism among analysts regarding the company's earnings prospects [12]. - This increase in consensus estimates has resulted in a Zacks Rank 2 (Buy) for Royal Caribbean, suggesting a positive outlook for the stock [13].