DB cautious on cruise stocks as fundamentals “not as clear as bulls believe”

Investing.com -- Deutsche Bank maintained Hold ratings across its cruise line coverage, pushing back on bullish expectations ahead of second-quarter earnings and arguing the sector's outlook is "perhaps not as clear as bulls believe it to be."

According to a note from analyst Chris Woronka, while cruise is often described as an under-penetrated travel vertical with consistently strong demand, U.S. hotel RevPAR, particularly at resorts and within top-tier price segments, is "poised to meaningfully outperform the aggregate of cruise industry yields this year."

Deutsche Bank attributed this divergence at least partly to differences in supply growth between the lodging and cruise industries, estimated at around 400-500 basis points, given minimal net hotel room additions.

As a result, the firm suspects "the cruise industry is having to rely more on selective discounting and increased marketing to drive even the more modest yield growth it is getting."

The bank acknowledged a buy-side view that cruise stocks could still perform well despite likely third-quarter guidance warnings, on the premise that this would be the final guide-down and that the group is well-positioned for 2027, given easier comparisons and potentially lower fuel costs.

However, Deutsche Bank countered that Royal Caribbean and Carnival "still appear to be overweighted by most tactical investors," and if signs of pricing degradation emerge heading into 2027, bulls may become less inclined to favor the group.

Deutsche Bank remains Hold-rated across Royal Caribbean, Norwegian Cruise Line and Carnival.

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