What happened
Cruise-stock investors were left feeling mildly seasick on Wednesday, as the bellwether companies in the sector couldn't keep pace with the broader stock market. As the S&P 500 index inched nearly 1% higher, Royal Caribbean (RCL 1.08%) basically traded flat on the day, Carnival (CCL 1.58%) (CUK 1.27%) declined marginally, and Norwegian Cruise Line Holdings (NCLH 3.15%) fell by 1.4%.
So what
The finger of blame for this can be pointed at white-shoe investment bank Morgan Stanley, which published a downbeat research note on the cruise industry Wednesday morning.
Image source: Getty Images.
On the basis of a survey conducted with booking agents, Morgan Stanley analyst Jamie Rollo reiterated his underweight (i.e., sell) recommendations on Royal Caribbean, Carnival, and Norwegian. Rollo wrote in his note that, "Our checks show still high customer caution over booking a cruise, with the disruption from COVID supplemented by concerns over the risk of conflict between Russia and Ukraine and the suspension of Crystal."
Crystal Cruises, a relatively small U.S.-based cruise operator, suspended its operations last month following the bankruptcy filing of its parent, Genting Hong Kong.
Now what
The Morgan Stanley prognosticator fully expects the gloom hovering over the cruise industry to linger. Rollo wrote that, "The cruise industry has now lost two peak booking period 'wave seasons', we see its recovery lagging other leisure/travel markets, and remain cautious given forecast risk and leverage."
While he certainly has valid points, and it's indisputable the cruise industry is far from healthy these days, a big recovery in travel is almost certainly in the cards once we get past the scary phases of COVID. Investors might then consider buying beaten-down titles like Carnival, Royal Caribbean, or Norwegian on the current weakness.
