Investing.com -- Morgan Stanley upgraded Carnival to Overweight in a note on Thursday, citing an improved risk-reward profile after a steep share price decline this year.

Analyst Jamie Rollo said the firm is “taking the plunge,” even as it cuts earnings forecasts and lowers price targets.

Rollo wrote that “CCL's -28% YTD move from peak exceeds” the firm’s 14% and 6% EPS estimate reductions for FY26 and FY27.

He added that the drop is “in line with its Iraqi War, Russia-Ukraine and Arab Spring drops,” noting that the company “saw material rebounds post these conflicts ending.”

Morgan Stanley said the shares now trade on “FY27e P/E <10x.”

The bank reduced its FY26 net revenue yield assumption by 100 basis points to 2.0% and cited “softer European demand,” though it noted that early checks show “no widespread cancellations yet.”

It also highlighted Carnival’s limited Middle East exposure of 1–2% of capacity and high fuel sensitivity, saying every $10-per-barrel change in oil affects FY26 EPS by 5%.

Despite lowering the U.S. price target to $31 and the U.K. target to 2,350p, Morgan Stanley noted that the setup resembles past demand shocks.

Rollo wrote that 30% declines historically produced “rebounds of 40–120%,” adding that these figures “give us some comfort” in upgrading the stock.