Shares of Carnival (CCL), Norwegian Cruise Line (NCLH) and Royal Caribbean (RCL) are under pressure after Morgan Stanley analyst Jamie Rollo told investors he remains cautious on the cruise space due to oversupply risk and as some top retailers reported worries about a general slowdown hitting fourth quarter demand. SURVEY SHOWS WEAKENING PICTURE: In a research note to investors, Morgan Stanley’s Rollo lowered his price targets for Carnival to $63 from $70, Norwegian to $58 from $64 and Royal Caribbean to $110 from $130, saying his survey of U.S. travel agents showed a weakening picture. While booking volumes remain positive and May was described as “unusually strong” by some agents, he noted that overall pricing is described as flat, which is sequentially weaker. The impact of the Kilauea volcano has affected Hawaii bookings, with many agents citing third and fourth quarter Caribbean as being a concern, the analyst contended. Further, he highlighted that some top retailers reported worries about a general slowdown hitting the fourth quarter of 2018 that will impact 2019 departures. Rollo believes Caribbean remains the main market to watch out for, and according to his channel checks, Royal Caribbean seems to be in a better position compared to Carnival. Additionally, the analyst pointed out that the recent strength in the oil price and U.S. dollar are a double negative for cruise stocks, as these two historically move in opposite directions to create a natural hedge. Overall, Rollo remains cautious on the cruise space due to oversupply risk. QUANTITATIVE WEB RESEARCH: Additionally, Morgan Stanley’s Rollo told investors that quantitative web search showed mixed results for the cruise lines. The analyst highlighted that year over year pricing has improved for four out of Carnival’s five main brands, while for Royal Caribbean, pricing improved for Celebrity but weakened for RCI. Pricing weakened for Norwegian Cruise Line’s Norwegian brand as well, he added. Nonetheless, Rollo cautioned against reading too much into web research given calendar/channel/deployment shifts, but pointed out that his data has a “good historical correlation” with actual achieved ticket prices. PRICE ACTION: In morning trading, shares of Carnival, Norwegian Cruise Line and Royal Caribbean have dropped almost 4% to $60.95, $51.06 and $102.40, respectively.