Goldman Sachs turned attention to the theme park sector, telling investors it initiated coverage on Cedar Fair LP FUN, SeaWorld Entertainment Inc SEAS, and Six Flags Entertainment Corp SIX.
With amusement parks riding high on post-COVID demand and considerable growth in admissions and in-park spending, it’s a sector ripe for investor scrutiny. Here’s what Goldman analyst Lizzie Dove thinks about theme parks.
Cedar Fair LP: Buy rating, $50 price target.
Despite current investor caution around the theme park sector, Dove sees a +5.0% EBITDA CAGR through 2026. She cited Cedar Fair’s well-invested park portfolio, stable management team, and high-repeat customer base as key contributors to pricing power.
SeaWorld Entertainment Inc: Buy rating, $75 price target.
SeaWorld’s high exposure to the burgeoning Orlando market offers admissions pricing power, while mobile app usage and new park investments could bolster in-park spending per-cap growth, Goldman said. Dove believes ongoing cost-cutting initiatives and growth opportunities from international licensing and domestic resort potential are not being adequately appreciated by investors.
Six Flags Entertainment Corp: Sell rating, $26 price target.
Despite an anticipated easy comp from a 40% attendance decline in 2022, Goldman suggested that consensus may be misjudging per-cap growth in 2023 and the ongoing investment necessary for advertising and new attractions.
Given the cautious investor sentiment with potential recession impacts, parks over-earning, and competition, Dove urges investors to focus on company-specific growth drivers and potential return on invested capital late cycle.
Despite park multiples reflecting a 15-20% discount versus pre-COVID levels, Goldman said the growth opportunity is still intact and warrants a fresh look from investors.