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Regional theme parks are in focus as they gear up to announce their earnings in early May.
Valuations in this segment are significantly below their pre-COVID-19 pandemic levels and lower than other consumer sectors, according to Morgan Stanley.
The Media & Entertainment Analyst: Thomas Yeh initiated coverage of the following regional theme parks:
- Cedar Fair, L.P. FUN at Overweight, with a price target of $53
- SeaWorld Entertainment Inc SEAS at Overweight, with a price target of $70
- Six Flags Entertainment Corp SIX at Equal-Weight, with a price target of $29
The Media & Entertainment Thesis: Regional theme park stocks are “unique assets with low competitive risks and resilient earnings power,” Yeh said in the initiation note.
Check out other analyst stock ratings.
The Cedar Fair Thesis: “Well-invested properties with a strong recurring visitor base speak to underlying pricing power,” the analyst wrote. Cedar Fair’s margins could improve ahead, “as park revenues continue to scale and expense growth normalizes,” he added.
The SeaWorld Thesis: “Despite greater travel exposure vs. peers and already industry-leading EBITDA margins from cost efficiency measures, an overlapping traffic footprint with travel-based Disney/Universal and potential tailwinds from returning international visitation drive attendance and per cap spending growth,” Yeh stated.
The company’s cost reduction initiatives continue and the higher capital expenditure it has planned for 2023 could “unlock long-term growth opportunities,” he added.
The Six Flags Thesis: The company has plans to ease the significant price hikes that impacted attendance in 2022, suggesting “meaningful opportunity” for a recovery in revenues, the analyst said.
Yeh chose to remain on the sidelines due to “low visibility into the path for recovering lost attendance and a premium multiple vs. peers.”
FUN, SEAS, SIX Price Action: Shares of Cedar Fair were up 0.29% at $41.87, while shares of SeaWorld Entertainment were down 0.48% at $53.47 and Six Flags Entertainment were down 1.34% at $24.24 Thursday morning at publication.
Photo: Zachariah Aussi on Unsplash
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