Truist starts OneSpaWorld with Buy into excess free cash flow

Truist analyst Gregory Miller initiated coverage of OneSpaWorld with a Buy rating and $12 price target. OneSpaWorld is by far the largest operator of spas on cruise ships and operates wellness services at select destination resorts, OneSpaWorld tells investors in a research note. Cruise ship occupancy returning to normal levels in 2023 and new ship supply should drive excess free cash flow for the company to deleverage and possibly dividends and/or buybacks, says the analyst. He adds that unlike the public cruise lines, OneSpaWorld is asset light with 1% of revenues for capital expenditures. That said, “given cruise industry issues and COVID,” he views the shares as a “higher risk-reward story until the cruise industry renormalizes.”