'Buy' Rating Reiterated For Cruise Shares

Shares of cruise stocks, Carnival Corp. and Royal Caribbean Ltd., have traded down recently, with a sharp pullback following the recent release of the Consumer Confidence Survey. However, in a report released last week, researchers Lazard Frères & Co. said the shares are nearing an oversold level, representing an excellent buying opportunity, and reiterated their "buy" rating for both Carnival and Royal Caribbean. The Consumer Confidence Survey is a five-question survey that measures the level of confidence that individual households have in the performance of the economy. A composite index is created based on the responses. The source for the dip, the report says, was that the Consumer Confidence Index for September shows a sequential decline from August levels. However, say Lazard & Frères, the CCI has declined in September in each of the past five years, and has rebounded in the months following. In fact, the CCI levels for this September are six percent higher than they were last year, indicating that consumers are actually more confident at this time than in any September in the past 10 years. This is consistent with Royal Caribbean's recent booking position of about 63 percent for first quarter 2000, a slight increase over last year - achieved with more than 15 percent more capacity. If the economy does enter a slower period, the report says, cruise companies will be better positioned than other leisure industries to defend market share because: cruising only represents four percent of the vacation industry, cruises deliver more value than land-based vacations, and cruise lines continue to upgrade their services. "As we look into 2000," the report concludes, "we believe the top cruise companies are well positioned for another year of solid performance, driven by capacity increases, introduction of new ports and itineraries and consumer interest in millennium cruises. The seasonally slow fall period has historically represented a good entry point into cruises shares. We, therefore, believe that the recent pullback in the shares of RCL and CCL has yielded an attractive buying opportunity in companies poised for significant growth in the year 2000 and beyond. We reiterate our 'buy' recommendation for CCL and RCL shares."