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Carnival Downgraded At Morgan Stanley; Agents' Survey Shows Weak August

Carnival Corporation NYSE:CCL - Carnival Downgraded At Morgan Stanley; Agents' Survey Shows Weak August

Morgan Stanley’s Jamie Rollo mentioned the monthly agents' survey revealed cruise demand softened in August while prices also weakened.

Rollo downgraded the rating on Carnival Corp CCL from Equal Weight to Underweight, while lowering the price target from $54 to $48.

“With the industry orderbook at a record high, Europe/China likely to stay weak and Caribbean risks rising, we see yields continuing to slow,” the analyst explained.

Weak Bookings

Morgan Stanley’s qualitative survey of cruise travel agents in the United States revealed “neutral to negative” booking volume trends for August, which is usually one of the busiest months of the year for booking.

The travel agent panel also indicated ratings were falling, while promotions were growing, as were agent incentives, “which given sluggish volumes likely indicate general demand weakness rather than operators attempting to build a base of business,” Rollo noted.

Although cruise lines have denied it, some of the agents mentioned the Zika virus as a reason for the decline for the first time.

Falling Prices

In addition, the analyst pointed out that “quantitative webscraping” of cruise prices suggest that prices have been holding steady for Carnival Corp.

“Pricing improved for around half the brands we glean prices for, and weakened for around half, the net result suggesting CCL Q3 yields similar to Q2,” according to the Morgan Stanley report.

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DateFirmActionFromTo
Sep 2016Morgan StanleyDowngradesEqual-weightUnderweight
Jun 2016Goldman SachsMaintainsNeutral
Jun 2016Sterne Agee CRTInitiates Coverage onBuy

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