Could Royal Caribbean Be a Multimillionaire-Maker Stock?

The tranquil seas for Royal Caribbean Cruises (NYSE: RCL) should continue in the new year. The cruise line operator's shares have gained more than 300% over the past five years as it continues to evolve in a post-pandemic travel era. Still, a change in the winds of consumer sentiment could prevent the stock from becoming a multimillionaire maker.

Young adults embracing the sea

Royal Caribbean is benefiting as a new generation of younger travelers comes to appreciate the joys of sailing the seas and all-inclusive packages. The company's bookings are skyrocketing. In its third-quarter report, management wrote: "Bookings for 2026 have come in at rates that are well above the prior year, resulting in a year-over-year rate growth at the high end of historical ranges." Onboard spending per passenger has also increased, and purchases are more commonly being booked ahead of time.

Image source: Getty Images.

This is good news for Royal Caribbean's shareholders. In addition to the stock being up more than 22% year to date as of Dec. 30, Royal Caribbean is currently paying a quarterly dividend of $1. That's a solid rebound for a company whose investors endured a lengthy suspension of dividends due to the COVID-19 pandemic. Royal Caribbean reinstated its dividend in mid-2024.

Rival Carnival (NYSE: CCL) hasn't seen the same type of returns over the past five years. While the stock is up a similar percentage year to date, Carnival is up just over 47% since the end of 2020. Perhaps more meaningfully for both companies, since the end of 2019 -- prior to the market's recognition of the then-looming pandemic -- Royal Caribbean is up 111% while Carnival is down by about 40%.

Royal Caribbean is perceived as a more high-end option for cruises, with bigger ships, a greater number of unique attractions, and extensive programming.

Will cruises stay in fashion?

Whether or not Royal Caribbean can become a multimillionaire-maker stock will largely depend on the sentiment of younger generations. Generation Z and millennials are embracing experiences and travel over more traditional financial milestones such as home buying, which is largely seen as an unreachable goal for many. As long as the enthusiasm for vacations continues to grow, and barring any new pandemic, Royal Caribbean's shareholders will benefit. Still, it will take continued innovation and new experiences to keep those younger generations of travelers coming back.

At some point, macroeconomic factors hitting both the cruise line and its customers are liable slow this ship right down. Rising fuel costs, higher inflation, higher interest rates, or any combination of those headwinds could emerge -- and at some point, they probably will.

Sailing ahead of the competition

From an investment perspective, Royal Caribbean doesn't hold all of the advantages over its competitors. The stock already trades at higher current and forward price-to-earnings ratios than either Carnival or Norwegian Cruise Lines. Royal Caribbean still carries a significant amount of debt on its balance sheet, too -- $20.6 billion as of the end of the third quarter.

On the positive side, it has been paying its debt load down, and now carries slightly less than Carnival.

Royal Caribbean has considerable room to grow in market share. Among the main cruise lines, its market share is about 26%. Carnival, in the top spot, has a share of more than 32%.

There are a lot of good things happening with Royal Caribbean, and its share price could keep growing, but it doesn't look like it will become a multimillionaire-maker stock for anyone unless the company succeeds in building long-term loyalty among today's younger travelers -- and unless the investor in question is starting that journey to seven figures with a very large purchase of shares.

Catie Hogan has no position in any of the stocks mentioned. The Motley Fool recommends Carnival Corp. The Motley Fool has a disclosure policy.