Cruise Lines Shares Drop as Morgan Stanley Sees Troubling Signs

(Bloomberg) -- Cruise lines are feeling a little sick today, with potentially choppy seas ahead.

Carnival Corp., Royal Caribbean Cruises Ltd. and Norwegian Cruise Line Holdings Ltd. all fell Tuesday after Morgan Stanley analysts warned of possible weakness in coming quarters. Carnival saw the biggest slide, down as much as 4.2 percent to the lowest since May 2017.

Cruise Lines Shares Drop as Morgan Stanley Sees Troubling Signs

The report, written by analysts led by Jamie Rollo, surveyed U.S. travel agents and found that after an “unusually strong” May, many saw the third and fourth quarters in the Caribbean as a concern, due to hurricane fears and a surplus of capacity. With overall pricing described as flat, the report said that some top retailers are worried about a general slowdown coming in the fourth quarter.

“The Caribbean remains the main market to watch out for,” Rollo said, cutting the price targets of Carnival, Royal Caribbean and Norwegian. “We remain relatively cautious on the cruise lines given the high and increasing level of industry supply growth, slowing yield momentum, and weakness in the Caribbean and China.”

Rising oil prices and recent strength in the U.S. dollar are negatives for cruise stocks, the report said. The price of WTI Crude is at about $64.50 a barrel compared to $47.40 a year ago. The U.S. dollar has also seen gains lately, with the Bloomberg Dollar Spot Index hitting a six-month high last week.

©2018 Bloomberg L.P.