Carnival (CCL) stock has fallen about 28% year-to-date, which is comparable to declines during the Iraqi War, Russia-Ukraine conflict and Arab Spring, after which shares rebounded strongly, Morgan Stanley said Thursday in a note.

The brokerage lowered its full-year 2026 net revenue yield estimate to 2% versus the guidance of 2.5%, assuming softer European demand. The firm cut its EPS forecasts by 14% for 2026 to $2.27 and by 6% for 2027 to $2.62, according to the note.

Gross industry supply of cruise berths will average nearly 4% over 2006 to 2028 before falling to about 3% after 2028, which should lead to improved supply-demand balance and help pricing power, the brokerage said.

While its revenue yields and margins are behind peers, it suggests that Carnival has potential for recovery. It is improving returns by shuffling ships between brands, exiting underperforming hardware, adding high return private destinations, and lowering cost, according to the note.

Carnival is scheduled to report Q1 results next Friday, and Morgan Stanley said it expects a cautious outlook with trimmed guidance due to higher oil prices.

Morgan Stanley upgraded Carnival to overweight from equal weight but lowered the price target to $31 from $33.

Price: 24.30, Change: +0.14, Percent Change: +0.56