Monday, January 08, 2007

Calls of Note Part 5

Goldman Sachs is adding Royal Caribbean (NYSE:RCL) shares to their Conviction Buy List and estimates 22% upside potential over the next 12 months. Firm thinks the overhang of higher energy expenses seems to be abating while on the margin they feel more confident that pricing trends may be slightly more robust than the current pessimistic expectations. GSCO thinks last year's underperformance (-8% vs gaming/lodging +36%) sets Royal up to outperform in 2007 as expectations are low and P/E multiple (13.6X) is towards the bottom of the historic range (10X-20X).

Catalyst Two positive near-term catalysts. 1) Firm thinks RCL will report solid 4Q06 in
February and a positive 2007 outlook. 2), We are entering wave season (next 8-10 weeks) when 28%-30% of RCL's cruises are booked, investors visit the companies, and cruise stocks are more likely to outperform.

Notablecalls: I would have called this one actionable 2 pts lower. Now it goes to the good to know category. There's a fair chance it will get faded. These stocks have seen some short covering over the past couple of weeks.

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