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The SeaWorld Turnaround Story Remains Misunderstood

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The SeaWorld Turnaround Story Remains Misunderstood

Don't short Shamu.

Shares of SeaWorld Entertainment Inc (NYSE: SEAS) will rally as the company executes a five-point turnaround plan, Stifel analyst Steven Wieczynski said in a Tuesday note.

SeaWorld bears point to concerns tied to branding, attendance, cost cuts and competitiveness, Wieczynski said.

“While we fully understand the bears’ concerns, we also don’t believe any of those concerns are overly warranted and believe SEAS management continues to address those challenges head-on.”

Stifel maintains a Buy on SeaWorld with a $23 price target. Even with SeaWorld trading at a 15–25 percent discount to its peers, shares are still worth $24–$29 based on the company’s projected 2018 EBITDA, according to Stifel.

SeaWorld ended its breeding program for captive killer whales in 2016, but remains under pressure from animal rights groups. "Some people love SeaWorld and some people will never like us," CEO Joel Manby told the LA Times last year.

‘Multiple Positive Catalysts’

SeaWorld has announced positive news in recent months, Wiecznyski said: Debt restructuring, the sale of the 21-percent stake owned by Blackstone Group LP (NYSE: BX) and the construction of a “Sesame Street” theme park.

The Stifel analyst said the developments haven’t been fully priced into SeaWorld shares.

The company is focusing on pulling guests from a 300-mile radius around its parks and is rolling out a general admission strategic pricing model, Wieczynski said.

Risks to the model behind Stifel’s $23 price target include a short operating season, “animal activist overhang,” bad weather, theme park accidents and a reliance on discretionary spending by consumers, according to Tuesday’s note.

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Image Credit: By Fernandafb10 - Own work, CC BY-SA 4.0, via Wikimedia Commons

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Dec 2019MaintainsHold
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