Carnival Corp (CCL)

[Tha Part Time Er]

Shares of cruise operators rallied Wednesday, reversing earlier losses, despite a bearish call from Morgan Stanley analyst Jamie Rollo, who said he believes the cruise industry will take longer than almost any other form of travel to return to normal, as a result of the COVID-19 pandemic. Shares of Norwegian Cruise Line Holdings Ltd. NCLH, +3.39% rose 3.7% in afternoon trading, after being down as much as 4.0% earlier in the session; Royal Caribbean Cruises Ltd. RCL, +3.76% gained 3.8%, after being down 2.5% at its intraday low; and Carnival Corp. CCL, +2.25% reversed an earlier loss of as much as 1.8% to trade up 2.2%. Rollo downgraded Norwegian to underweight from equal weight and trimmed his price target to $13, which is 27.5% below current levels, from $12. He also resumed coverage of Royal and Carnival with underweight ratings. "We model a return to operations in [the fourth quarter of 2020], but expect it will take 6 months for the industry to rehire crew and reposition ships, and we also assume 2021 revenue yields will be depressed by weak demand, travel uncertainty and the use of credits given on 2020 cancellations," Rollo wrote in a note to clients. He doesn't expects positive earnings per share until 2023 for the companies, and sees "no return" to 2019 EPS levels, as high cash burn and capital commitments mean debt leverage "has taken a permanent step up." Over the past month, Norwegian's stock has rallied 30.4%, Royal shares have advanced 42.6% and Carnival's stock has climbed 23.8%, while the S&P 500 SPX, +1.36% has tacked on 10.2%.