RCL at ~$230: Sandals widens the moat, but I don’t think the deal is cheap

RCL is around $230. Its 2026 adjusted EPS guide is $17.73-$17.87, and capacity is set to grow 4%, 6% and 7% in 2027-29.

Now it is paying $3B for 50% of Sandals and Beaches at about 10x forward EBITDA. That implies roughly $300M of EBITDA for RCL’s share. The whole purchase is being funded with debt.

Using RCL’s recent 5.55% bond as a rough funding cost, that is about $167M of yearly interest. The Sandals loan rate is not disclosed. So I do not see much value creation on day one. It has to come from growth and cross-selling.

That part makes sense. RCL already has ships, private islands, loyalty and customer data. Sandals adds a major land-resort brand. Royal can now keep more of the same customer’s vacation spending instead of losing them when they want a resort instead of a cruise.

My DCF uses an 8.5% WACC, 2.5% terminal growth, management’s capacity plan and the disclosed ship capex schedule. I value Sandals near the $3B paid because the deal itself looks fairly priced.

I get about $280/share before giving full value to RCL’s TUI stake.

The risk is debt. Pro forma net debt is about $25.5B, with large ship commitments still ahead.

At $230, I see a better moat and a decent price. I do not see a huge margin of safety yet.

I wrote up the filing in more detail on my website. Happy to send the link.