Carnival Corporation (CCL), Royal Caribbean Cruises (RCL) benefit from Norwegian Cruise Line (NCLH) upgrade

• UBS upgraded Norwegian Cruise Lines on Wednesday.
• UBS cited better bookings and higher price points.
• CCL, RCL and NCLH stocks all jumped more than 10% on the news.

Carnival Corporation (CCL) jumped 10.1% on Wednesday following an analyst upgrade of one of its competitors. Norwegian Cruise Line Holdings (NCLH) advanced 11.6% to close at $12.98 after UBS moved it rating from Neutral to Buy on the cruise company. Despite cutting its price target from $18 to $15, the heavily pessimistic current market environment was searching for any speck of positive news, and this did the trick. Royal Caribbean (RCL) nearly bested Norwegian by closing 11.5% higher at $45.36 as the entire cruise industry seemed to benefit from Norwegian's good fortune.

NCLH, CCL, RCL stock news

UBS said its decision to upgrade Carnival Cruise Lines was mainly due to better-than-expected booking data. Lots of customers have pent-up demand for cruises after suffering indoors over the past two years due to the Covid-19 pandemic. Now that the pandemic has largely been ignored outside of China, cruise companies are seeing somewhat better demand than they did pre-pandemic.

“We are now overweight the cruise sector with a preference for RCL due to its stronger occupancy recovery, record pricing on bookings both in 2H'22 and 2023, and lowest near-term maturities,” UBS said in its client note. “We see NCLH as our next most preferred name due to relatively greater concentration of domestic passengers sourced and strong pricing given its higher exposure to the luxury segment.”

UBS' upgrade come a few weeks after Truist Securties also upgraded Norwegian to Buy and a price target of $19, and Barclays moved its price target from $14 to $16 on the stock.

UBS also maintained its Buy rating on Carnival Cruise Lines on Wednesday, but it is surprising that CCL stock advanced so thoroughly since the Swiss investment bank cut its price target from $11 to $8. Closing the session at $7.31 on Wednesday gives CCL little room for further advancement, and shares are duly selling off in Thursday's premarket.

Royal Caribbean saw UBS maintain its Buy rating on RCL stock, but the bank cut its price target from $65 to $56. Based on that price target, RCL still has 23.5% upside after Wednesday's closing price. Carnival has just 9.4% upside, and Norwegian Cruise Line has 15.6% upside.

Norwegian Cruise Line stock forecast

NCLH stock closed the session on Wednesday just below the 9 and 21-week moving averages. This region between $13 and $13.40 will be difficult to break through due to those overhanging points of resistance. This makes it likely that Norwegian Cruise Line stock will pull back to form a base before making a new drive higher. Above the moving averages, however, sits the descending top trendline at $16.50. Longer-term support sits in the zone between $10.30 and $11, so there is sparse room for the stock to rotate within this region.

NCLH weekly stock chart

Carnival Cruise Lines stock forecast

As we said earlier, UBS' low price target of just $8 places a sort of cap on the CCL share price. From the weekly chart below, it is clear that Carnival stock has dropped below the pandemic low from March 2020 that was around $8. With the UBS suggestion, this is now the focal point for the share price. Below here CCL is bearish; above $8 it is bullish. Bulls may focus on the 8-week moving average near $8.80 or even the 30-week average at $12, but it all for naught until the macro picture for equities turns positive.

CCL weekly chart

Royal Caribbean Cruises stock forecast

Bulls will focus on the 30-week moving average here, which currently sits just below $52. The $50 level has proven difficult in the past, but bulls now have a leg up with the $56 price target from UBS. The Moving Average Convergence Divergence (MACD) has been crossed over for awhile now, but it will need to cross above the zero threshold for a continuing rally. Near-term support is at $31, and longer-term support sits at $20 and $24.

RCL weekly chart