Why SeaWorld Could Remain A Show-Me Story (And What That Means For You)
- SeaWorld Entertainment Inc (NYSE: SEAS) shares have plunged 15 percent in six months, after hitting a high of $21.82 on May 27.
- Credit Suisse’s Joel Simkins maintained an Outperform rating on the company, with a price target of $27.
- Contrary to investor expectations, it appears to be too early for the company to provide financial, and it could remain a "show me" story until results stabilize and capital plans announced, Simkins mentioned.
SeaWorld Entertainment provided an overview of its business fundamentals and turnaround strategy, with details of its path to stabilizing the business and ultimately generating growth. Analyst Joel Simkins said that most of the news was “already well known.”
Some investors were expecting financial targets to be announced. Simkins stated that it may be too early to “commit to financial targets,” and the company may “remain a "show me" story until results stabilize and capital plans are fully announced.”
CFO Peter Crage has been on SeaWorld Entertainment’s board for a short period. However, Crage has insider knowledge of the theme park industry.
“He highlighted that SEAS will move to zero base budgeting going forward and that half/more of the company's structural margin gap versus peers is related to zoological operations and its CA land lease,” the Credit Suisse report stated.
Simkins pointed out that there is a “readily addressable opportunity” for margin expansion of approximately 200-250bps over the next 2-3 years.
SeaWorld Entertainment indicated that it plans to phase out its Orca shows at the SD Park in 2016. While ending Orca shows in California could mark “an end to this story,” it may allow the company to refocus its asset in this State on resort opportunities and coasters, “potentially reducing distractions, improving margins, and increasing ROIC,” Simkins added.
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