OSLO, Norway (Reuters): "While it is well known that cruise demand has been declining precipitously since last fall, we do not believe the magnitude of the decline is appreciated," Barclays Capital said in a note to clients on Wednesday.

Barclays cut its share price target for Royal Caribbean Cruises Ltd, the world's second largest cruise operator, to $1 from $20 and its rating on the stock to "underweight" from "equal-weight".

"While we believe RCL will stay solvent, we estimate the company would become precariously close to facing liquidity issues," Barclays added.

A spokesman for Royal Caribbean Cruises told Reuters the company was in its "quiet period" ahead of publishing fourth-quarter results on Jan. 29 and would not comment on liquidity issues or any research reports.

Barclays lowered its earnings per share estimate for 2009 to a negative $0.92 from $1.98 and initiated a 2010 EPS estimate of minus $1.22.

It said it expected Royal Caribbean to miss fourth-quarter consensus estimates and report a 10 cents per share loss for the quarter.

Royal Caribbean shares dropped 8.9 percent in Oslo and 7.7 percent in New York trade at 1540 GMT.

Royal Caribbean: It's taking 'substantial discounts' to fill ships

Royal Caribbean today confirmed what anyone shopping for a cruise in recent weeks already knows: The economic downturn has forced the company to offer some monster deals.
With the economy tumbling, "both ticket sales and onboard revenue have been impacted," the company says in a statement accompanying the release of its most recent quarterly earnings. "It has required substantial discounts to generate the requisite volume."
Royal Caribbean says its profits for the fourth quarter of 2008 plunged by 98% from a year ago to just $1.5 million, or one cent per share, as it lowered prices, and the company offered a grim outlook for profits over the coming months. The results were below already lowered Wall Street expectations.
"As previously described, bookings began to suffer a substantial downturn in September," the line says in the statement.
Royal Caribbean says net yields for the 4th quarter -- the amount it brought in per cabin -- dropped 5.9% from the same quarter a year ago. It says net yields for the first quarter of 2009, currently underway, could be down a far heftier 14% to 16%. The company expects to lose tens of millions of dollars this quarter (it estimates the loss at 30 to 35 cents per share).
"The fourth quarter was an extremely difficult operating environment, and we expect even more challenges in 2009," Royal Caribbean Chairman and CEO Richard Fain was quoted as saying.
Still, Fain sees some signs of hope in the bookings coming in this month -- the start of the busy "Wave" season when many cruisers make their plans for the year. "Pricing is still very difficult, but booking patterns have begun to stabilize," he says.
Wall Street analysts have grown increasingly concerned about Royal Caribbean's financial position in recent months, noting that the company already is heavily in debt and has obligations to pay out billions of dollars more for ships it has ordered for delivery over the next three years.
On Wednesday, a Barclays Capital analyst warned that investors don't appreciate the magnitude of the decline in cruise ship demand. "While we believe RCL will stay solvent, we estimate the company would become precariously close to facing liquidity issues," Barclays noted. The firm slashed its price target for Royal Caribbean from $20 to $1 a share.
Royal Caribbean shares dropped more than 20% in early trading today on the New York Stock Exchange to under $7 a share. The company's stock is down about 80% over the past 12 months.
Royal Caribbean is the parent company of several cruise lines including Royal Caribbean, Celebrity Cruises and Azamara Cruises.

I was in this business I am semi retired ,And AllI can say ,is run do not walk ,run and buy rccl stock .it is a steal ,they may be in a little deep ship now ,but they have there ship togetherA very well run company ..At $7 a share in three years or less you will tripled your money ..maybe lots more this is a $30 to $40 stock ...I have seen this go round and round .I have no knowledge of the stock market just A inside gut feeling .you will thank me in the future..This market will explode in a year .And you will be rich...

Thanks for the shout out Jeff...I may not have noticed this, but bought the September $5s for $3.76 last month and this morning they traded at $11.70, with some more upside I think

Not huge positions, but enough to pay for another Belize trip, so a beer or two next time I see you.