Royal Caribbean 'the superior cruise operator' - Morgan Stanley

© Reuters.

By Sam Boughedda 

Morgan Stanley analysts assumed coverage of Royal Caribbean (NYSE:RCL), lifting it to Equal Weight from Underweight, Norwegian Cruise Line (NYSE:NCLH), cutting it to Underweight from Equal Weight, and Carnival Corp. (NYSE:CCL), maintaining an Underweight rating on Tuesday.

The analysts also lifted Royal Caribbean's price target to $50 from $40 and Carnival's price target to $7 from $6 per share while cutting the price target on Norwegian to $11.50 from $13 per share.

They told investors in a research note that heading into the important "Wave Season" peak booking period, its cruise channel checks remain mixed.

"Our channel checks saw some agents we spoke to mention improving interest in 2023 sailings, with inflation/recession concerns less prevalent, and the industry starting to see a more normal booking pattern with longer booking windows. Smaller luxury vessels continue to gain in popularity, and with most ports now fully open worldwide, exotic cruise demand is strong," the analysts wrote.

However, they said balancing this, "other agents highlight a slowdown in bookings over the holiday period, concerns around Covid/mask mandates returning after the significant increase in cases in China, and continued concerns around the economy/inflation."

"Some agents mentioned they are seeing difficulty in filling large mainstream ships," they added.

In addition, the analysts pointed CCL's weak outlook means they lower forecasts again, while they said RCL has "proved itself to be the superior cruise operator coming out of Covid," and NCLH's cost inflation is "running well above peers."

In a separate note Tuesday, the Morgan Stanley analysts said that NCLH has an uncertain consumer outlook, and its elevated debt and supply growth create an unattractive risk-reward.