Beleaguered SeaWorld Has A 35% Return Opportunity, Analyst Says

SeaWorld has become one of the most polarizing theme parks after several PR setbacks and a backlash from animal activists.

"Some people love SeaWorld and some people will never like us," CEO Joel Manby told the LA Times last year.

Although SeaWorld Entertainment, Inc. SEAS’s third-quarter attendance speaks to the latter, with a decline of 732,000 guests, one analyst views the company as being "grossly misunderstood," with significant upside from today's levels.

The Analyst

Steven Wieczynski of Stifel reiterated a Buy rating on SeaWorld Entertainment with a $15 price target.

The Thesis

Although SeaWorld is experiencing significant pressure from short sellers, with nearly 50 percent of shares short, should could quickly rally as management continues to execute on a five-point turnaround plan, the analyst said. (See Wieczynski's track record here.)

“Given our inability to identify any changes in the core operational improvement or incremental cost savings stories, we attribute the overwhelming majority of the recent move lower to relentless short selling activity," he said.

Growing concern over SeaWorld’s ability to comply with debt covenants as the company enters the seasonally slow fourth-and-first quarter periods are largely overblown, the analyst said.

“We encourage investors to take advantage of the irrational leverage covenant concerns to aggressively accumulate shares,” Wieczynski said.

SeaWorld shares are trading at a significant discount, presenting a compelling 35-percent return opportunity from current levels, according to Stifel.
“We believe investors are overlooking several items that negatively impacted 1Q17 results but are not expected to reoccur in the 1Q18 period.”

Price Action

SeaWorld closed Friday up 3.74 percent at $12.19.