UPDATE: Citigroup Upgrades SeaWorld Entertainment to Buy, Raises PT as IRS Overhang is Apt to Wane

In a report published Tuesday, Citigroup analyst Jason B. Bazinet upgraded the rating on SeaWorld Entertainment SEAS from Neutral to Buy, and raised the price target from $30.00 to $40.00. In the report, Citigroup noted, “Recall, in June 2013 the IRS formed a new working group to examine pending REIT conversions more closely. The mere existence of the working group cast a long shadow on a number of publicly held firms considering a REIT conversion (Lamar, Iron Mountain, Equinix). SeaWorld currently benefits from NOLs. Those tax assets will likely shield the firm from becoming a full cash taxpayer until 2017. But, investors must still decide if they should a) Fully-tax SeaWorld's cash flow and add the NPV of the NOLs or b) Assume SeaWorld will permanently shield the bulk of its cash flow from cash taxes via a REIT conversion. Thus far, SeaWorld hasn't said much about its long-term tax strategy.” SeaWorld Entertainment closed on Monday at $30.67.