Royal Caribbean taking China on a sea cruise

Published Tue, May 19 20158:35 AM EDTUpdated Tue, May 19 20158:47 AM EDT

Here's the best Wall Street research that came across the desk of CNBC Pro on Tuesday. The firm takes Royal to 'buy' from 'neutral' and adds the stock to its 'analyst focus list' on the notion that Chinese consumers will use their new found wealth to go cruising. J.P. Morgan's new price target of $90 represents an 19 percent gain from Monday's close. "Royal Caribbean brands benefit from the substantial investment that the company has made in China/Asia Pacific region. With RCL's introduction of two of its newest ships to the China and Asia Pacific region, management is making a substantial bet on the market. While the region is in its infancy from a penetration standpoint, RCL is investing heavily in advertising and marketing of its cruise product and infrastructure in the region. RCL is bullish on the market's prospects and is looking to tap into the region's rapid middle class customer and rapid urbanization. We believe that RCL has a significant opportunity to better capitalize on onboard spend from this customer base, and that over time the company could derive a more even split from customer ticket revenue and onboard (versus the 75 percent/25 percent split company-wide). Chinese customers tend to spend more in the Casino and retail shops, versus the spa and alcoholic beverages. China represents 6 percent of the company's capacity, though is 'significantly'more of RCL's profits at this point, and we expect this to grow steadily through 2017. Given that China sailings are chartered, there is less risk to this revenue stream over the next few Qs." The firm raises Mastercard to 'overweight' and takes the 12-month price target to $110, which represents an 18 percent gain from Monday's close. "We have been cautious on MA relative to V due to EU and JPM headwinds; however, a more constructive bias on the EU, incremental wins such as Citi and Itau, a diminished relative valuation gap, and prospects for improving fundamentals prompt an upgrade to Overweight. We are assigning a $110 price target based on 22x estimated 2017 EPS. Several model tweaks move our revenue estimates down slightly and EPS estimates up slightly." Cantor downgrades the beleaguered flooring company to 'hold' from 'buy' and cuts its price target nearly in half to $26. The stock closed at $26.06 on Monday. "We believe there are too many regulatory and legal risks at this juncture to justify a BUY rating. Our price target is based on a 2016 P/E multiple of 15x, which we view as a fair valuation given the current risk/reward scenario. We don't think LL's business model is broken, and we continue to believe its value proposition and broad assortment will drive a sales recovery and market share gains over the long term. Our near-term view has become much cloudier though, as LL faces uncertain outcomes from multiple regulatory and legal issues. We think the overall negative PR continues to gain momentum, making it extremely difficult for us to gauge customers' willingness to shift into other product categories now that the company has discontinued the sale of Chinese laminates." — With reporting by CNBC's Michael Bloom .

Chinese tourists wave as their passenger ship 'Legend of The Seas' arrives in Taiwan's northern Keelung harbor.

Patrick Lin | AFP | Getty Images

Here's the best Wall Street research that came across the desk of CNBC Pro on Tuesday.