Wall Street is warming up to cruise ship stocks in a big way, with Carnival (NYSE:CCL)(NYSE:CUK), Norwegian Cruise Line Holdings (NYSE:NCLH), and Royal Caribbean (NYSE:RCL) all getting big price target upgrades, but the outlook could still leave investors feeling cold.

Although analysts are becoming increasingly bullish about consumers returning to cruising again, the price targets they've set for the stocks are all well below where their shares currently trade.

Cruise ship sailing towards storm cloud

Image source: Getty Images.

Morgan Stanley analyst Jamie Rollo hiked his price target on Carnival stock by 29%, raising it from $14 to $18 per share, but with the biggest cruise operator closing yesterday at just under $27 a share, it means he thinks the stock is overpriced by 33%.

He also raised his price target on Royal Caribbean to $61 per share, a 22% increase, but like the other cruise ship operators, with Royal's stock just over $84 a share, there's a lot of air beneath where he thinks it ought to be.

Similarly, Berenberg analyst Stuart Gordon raised his price target on Norwegian Cruise Line 14% to $25, but that's still 14% below the $29 a share the smallest cruise operator trades at.

Rollo rates Carnival and Royal as underweight because demand is not as high relative to supply, the cruise operators have taken on significant debt, and the market has already baked in recovery multiples "well above" their pre-pandemic levels.

Gordon is just as cheery, saying investors bid up the stocks as "recovery plays," but the environment "remains challenging in terms of assessing the risk/reward balance for investors."

The industry's future is looking better, but uncertainty about when these companies will really resume operations means their investment potential is not as good as the market thinks.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.