KeyBanc Expresses Confidence In SeaWorld Turnaround In Upgrade

SeaWorld Entertainment Inc SEAS's comeback story is sustainable and backed by data, according to KeyBanc Capital Markets. 

The Analyst

Analyst Brett Andress upgraded SeaWorld Entertainment from Sector Weight to Overweight with a new $35 price target.

The Thesis

The bullish case for SeaWorld is based on the belief that a recovery in the brand and operations is underway, Andress said in the upgrade note. (See his track record here.) 

The analyst named two reasons to justify the position:

• The analysis of more than 40,000 reviews on TripAdvisor suggests customer satisfaction continues to improve, which implies the brand is benefiting from momentum.
• Multiple data points remain positive, including San Diego lease data, Texas mixed beverage data, Key First Look credit and debit card data, Orlando airport trends and FX rates/futures curves for international customers. 

SeaWorld pre-announced some third-quarter metrics in early October, including 10-percent attendance growth and 9-percent revenue growth, Andress said. This not only adds conviction to the turnaround story, but derisks the stock and creates an attractive entry point for investors amid "loftier" expectations, he said. 

SeaWorld stock is trading at 8.5 times estimated 2019 EBITDA, which is a discount compared to other amusement park companies with stocks trading at 9 to 11.5 times, according to KeyBanc. The research firm's $35 price target is based on a 10.5 times multiple on 2020 estimated EBITDA of $440 million discounted back one year.

Price Action

SeaWorld Entertainment shares were trading higher by 2.18 percent at $26.68 at the time of publication Thursday. 

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