By Sam Boughedda
Morgan Stanley said in a note to clients on Wednesday that cruise demand remains robust, with Royal Caribbean (NYSE:RCL) outperforming peers Carnival Corp (NYSE:CCL) and Norwegian Cruise Line (NYSE:NCLH). However, they warned that forecast and leverage risks remain.
Analysts explained that Morgan Stanley's "agent checks suggest cruise demand remains robust, with the best +/- commentary skew in 2 years."
"Cruise booking volumes seem to have remained robust after the end of 'Wave' season," the analysts wrote. "In a continuation of the strong demand reported during the year's peak booking period, March sounds like a solid month for cruise bookings, according to our US channel checks. Various agents mention bookings up by double-digit %s vs 2019, a lengthening booking window, and customer preference for trading up to more premium products."
They added that consumer perception of the economic outlook is also improving, and cruise line price also appears better, with some agents reporting pricing is up by high-single digits compared to 2019.
However, while channel checks are better, "consensus expectations have been consistently too high for some time, and leverage remains elevated," analysts said.
On RCL, the analysts explained that Q4 performance and FY guidance show the company is outperforming by a widening degree. "Our relative preference remains RCL, and we remain Underweight CCL and NCLH," they revealed.