Morgan Stanley upgrades Carnival on strong demand signals

Alexander Bueso WebFG News | 06 Dec, 2017 12:43 | | |

ep buquecrucero carnival legend enpuertomalaga
El buque de crucero 'Carnival legend' en el puerto de MálagaEUROPA PRESS/MÁLAGAPORT
  • 4,830.00
  • 1.11%53.00
  • Max: 4,840.00
  • Min: 4,721.00
  • Volume: 1,541,047
  • MM 200 : n/a
17:17 15/12/17
  • 7,490.57
  • 0.57%42.45
  • Max: 7,490.57
  • Min: 7,433.78
  • Volume: 0
  • MM 200 : n/a
17:25 15/12/17
  • 1,528.05
  • -0.33%-5.07
  • Max: 1,530.53
  • Min: 1,523.69
  • Volume: 0
  • MM 200 : n/a
17:25 15/12/17
  • 9,870.58
  • 0.52%50.62
  • Max: 9,870.58
  • Min: 9,808.78
  • Volume: 0
  • MM 200 : n/a
17:25 15/12/17
  • 4,162.18
  • 0.51%21.06
  • Max: 4,162.18
  • Min: 4,133.41
  • Volume: 0
  • MM 200 : n/a
17:25 15/12/17
  • 4,108.96
  • 0.50%20.38
  • Max: 4,108.96
  • Min: 4,081.00
  • Volume: 0
  • MM 200 : n/a
17:25 15/12/17
  • 0.00
  • 0.00%0.00
  • Max: n/a
  • Min: n/a
  • Volume: n/a
  • MM 200 : n/a
17:17 25/09/06

Analysts at Morgan Stanley have upgraded their recommendation on cruise ship operator Carnival on the back of strong demand signals.

Looking to the long-term, the broker was still worried about potential overcapacity in the cruise industry.

"A lot is riding on China being able to absorb much of the industry order book," the broker said.

More specifically, Morgan Stanley explained how the industry's order book had reached a record 235,000 berths, for supply growth of 45% out to 2025.

Net of scrappage, that would equate to a roughly 6% compound annual rate of growth between 2017 and 2021.

Hence, for the industry to sustain yield growth of between 2% and 3%, demand would need to rise by between 8% and 9% annually.

"[Maintaining that rate] for four consecutive years seems optimistic and is much more than historical levels (6% demand, 1% yield, 5% capacity)," the analysts wrote in a research note sent to clients.

Yet in 2017 stronger demand had outweighed record supply growth and a qualitative survey of US travel agents conducted by Morgan Stanley pointed to strong demand for cruises in November.

Indeed, tax reform in the States might be set to further boost consumer income and confidence and a stockmarket at records was also helping, the broker added.

Thus, despite no change to consensus earnings per share forecasts for fiscal years 2017 and 2018, the shares had outperformed the MSCI Europe, tacking on 20% year-to-date versus the benchmark's 10% gain.

On the back of all of the above, Morgan Stanley decided it was appropriate to "neutralise" its negative recommendation for the shares, raising it from 'underweight' to 'equalweight' and lifting its target price from 4,700p to 5,100p.

More news

15 Dec London close: Footsie gains as pound drops, Wall Street hits fresh highs

The top flight index recovered some ground on Friday, but mostly on account of weakness in Sterling after German Chancellor Angela Merkel reportedly echoed other European Union officials, saying "the most difficult phase is ahead of us".

15 Dec Week ahead: US data, Catalan elections in focus

The focus in the coming week will continue to be on the ebb and flow of data out of the US, including Republicans' progress on securing passage of their tax cuts.

15 Dec US open: Stocks jump as Republicans move to secure passage of tax cuts

Wall Street is heading higher again on Friday amid news that Republicans were tweaking their proposed tax cuts in order to secure prompt passage of the US tax bill.

15 Dec Airbus chief executive to step down in board shake-up

The chief executive of French planemaker Airbus will step down from his position in 2019 as the company announced a major shake-up of its management team.

15 Dec FTSE 250 movers: TalkTalk rises but Serco gives back gains

London’s FTSE 250 was up 0.1% to 20,023.23 in afternoon trade on Friday as the Christmas lull kicked in.

15 Dec US industrial production rises slightly less than expected in November

Industrial production in the States rose slightly less quickly than expected last month, despite higher output of business equipment and materials.

15 Dec Strategic Minerals renegotiates acquisition of Leigh Creek Copper Mine

Diversified mineral production and development company Strategic Minerals announced on Friday that, after the successful completion of technical and financial due diligence on the Leigh Creek Copper Mine company, it has agreed to continue with the acquisition on renegotiated terms.

15 Dec FTSE 100 movers: Sky jumps but retailers retreat on H&M sales

London’s FTSE 100 was up 0.3% to 7,469.23 in quiet afternoon trade on Friday.

15 Dec Gfinity partners with Microsoft for next Halo World Championship

International esports entertainment group Gfinity has been named as a preferred event partner to Microsoft for the forthcoming ‘Halo World Championship 2018’ for the next season, it announced on Friday.

15 Dec Hutchison Chi-Med begins fruquintinib trial in US

Hutchison China MediTech, known as Chi-Med, has initiated the United States Phase I bridging clinical trial of fruquintinib, it announced on Friday.