Carnival's stock plunge raises questions about cruise industry resilience
Carnival stock has taken a heavy beating this year. With losses of around 28% since the start of 2024, the cruise operator ranks among the sector's worst performers. Yet now, Morgan Stanley is stepping in, upgrading the stock from Equal Weight to Overweight—sending a clear message: the sell-off has gone too far.
Analyst Jamie Rollo draws a striking parallel. The current 28% decline closely mirrors the drops seen during the Iraq War, the Russia-Ukraine conflict, and the Arab Spring. And in each of those cases, what followed? A strong rebound. Rollo argues that both Carnival and the broader industry are now in a far stronger position than in past crises.
While Morgan Stanley has lowered its earnings forecasts for 2026 and 2027 to account for weaker revenue and higher fuel costs, the bank highlights the company's progress. Carnival is boosting profitability through strategic fleet management, phasing out unprofitable ships, and expanding its private-destination offerings. Add to that a shrinking debt load and falling interest expenses, both of which are set to drive earnings per share higher.
The outlook for other cruise lines is less compelling. Royal Caribbean remains at Equal Weight, as its risk-reward balance appears less favorable. Viking Holdings retains its Overweight rating despite its greater exposure to Europe, while Norwegian Cruise Line continues to grapple with uncertainty. All four stocks have lost over 15% in the past three weeks alone. But for Carnival, Morgan Stanley believes the time to buy is now.
