UBS has improved its outlook on Royal Caribbean Cruises as it sees demand for cruising picking up despite the lingering Covid-19 pandemic.
The US investment bank raised its price target for the Richard Fain-led company's shares to $65 from $46.
It also improved earnings per share forecasts to $1.89 from $1.34 for 2021 and to $5.95 from $5.10 for 2022.
"We continue to believe that RCL is best-positioned for a recovery and we are updating our estimates to reflect this," analyst Robin Farley said in a client note.
A major US cruise seller said that calls and website traffic to book cruises in the past week improved to 67% down from 80% down a year ago, she added.
"And recently he had his best day in the last three months, a huge day in sales that was close to last year's levels," she wrote.
"Additionally, we pointed out [to] data in [the] last couple of weeks that in some beach markets where it was the first weekend of lifted Covid restrictions, occupancy doubled on the weekend vs. the weekdays, potentially indicating pent-up leisure demand."
UBS has lifted its 2021 forecast on booking yields by three percentage points to 36% below 2019 yields, and its 2020 yield outlook by three percentage points to 20% below 2019 results.
The bank is also looking favourably at Royal Caribbean, giving itself 13 months of liquidity by raising $3.3bn in debt finance to pay off $2.35bn in short-term debt amid a $1.4bn loss for the first quarter.
"Given this liquidity and additional debt capacity, we believe the risk of significant dilution is much lower," she said.
Royal Caribbean's shares, which trade on the Nasdaq Stock Market under ticker symbol RCL, slipped 1.8% to $50.82 by mid-afternoon on Friday.
