Some travel and entertainments centers fared better than others over the past couple of years. While Disney could rely on its new online streaming service to supplement revenues, SeaWorld Entertainment Inc (NYSE:SEAS) was not so lucky. Global travel was virtually shut down, and social distancing guidelines hit SeaWorld hard.
Now that the economy is reopening and people are craving entertainment venues, is SeaWorld stock a buy?
Wall Street has high expectations for the company’s recovery this year. In fact, it’s estimated to grow revenues by 1,300 percent in its first reopened quarter. It’s not a number to get too excited by though as it’s likely a one-time rebound of this magnitude following a 69 percent decline in top line sales when the fallout from the pandemic affected it.
SEAS share price has already moved sharply higher in anticipation of better results. This leaves seemingly little room for today’s investors to squeeze a profit from the $4 billion+ company.
SeaWorld: 7 Theme Parks & As Many CEOs?
SeaWorld Entertainment Inc consists of seven theme parks and five water parks in the United States, including SeaWorld and Busch Gardens. The company also has an entertainment division that makes documentaries and TV content, like Blackfish, along with several hotels and resorts.
Leading into the pandemic, the company had a rotating door of CEOs. Gus Antorcha lasted seven months in 2019 before being replaced by Sergio Rivera. He joined in November 2019 and resigned by April 2020, when interim CEO Marc Swanson was appointed. Ironically, he outlasted both his predecessors.
Short tenures at the top level should spark concern among investors that what lies beneath the surface is not pretty.
Is SeaWorld Stock A Buy?
SeaWorld has an overall consensus rating of Buy from five analysts, and this is largely due to the company both exceeding expectations last quarter and expected to skyrocket revenues now that it’s reopened. Of course, “reopened” could be a bit of an exaggeration.
Even with its gates open, social-distancing guidelines ensure the parks will take time to reach full capacity. And even then, it may never reach pre-pandemic levels; we simply don’t know the future.
The company had shipwrecked financials in the years prior to its precipitous 69 percent revenue decline, and in a lot of ways it’s in a better position than it was back then. On top of reopening, it has several new rides coming and summertime is traditionally its peak season.
SEAS financials give an indication of what the future holds for the company.
SeaWorld Sales Forecasts and EPS Struggles
In the fiscal year 2020, 6.4 million guests attended the company’s parks. This is a decline of nearly 10 million people from the prior year. This dropped total revenue for the year to $431.8 million, which is $966.5 million less than it earned the prior year.
This led to a $312.3 million net loss, which is $401.8 million less than in fiscal year 2019. It ended the year with $434 million in cash and equivalents on its balance sheet.
Things picked up quickly in 2021, and the first quarter alone saw 2.2 million guests generating $171.9 million in revenues. Because the summer/spring months are the busy season, analysts are bullish on the returns through to the holiday season.
Still, SeaWorld investors aren’t out of the woods yet following at -$245 million EBIT report in 2020.
SeaWorld Dividend Chopped
SeaWorld was already having trouble treading water before the pandemic. The company rotated through executive leadership as it struggled to squeeze out profits. Not only that, but SeaWorld elected to cut off its dividend payment.
So, although amusement parks are booming right now, SeaWorld isn’t necessarily the best buy, and its valuation provides a clue as to why.
Valuation: Any More Juice In The Lemon?
SeaWorld is worth over $4 billion, which is a hefty valuation and all-time high for the company.
Although profits are expected to keep increasing, any potential gains for investors are going to be slim. However, there’s plenty of hope that things are on the upswing.
Not only are more customers coming every day, but the average revenue per capital is up 9.4 percent to $69.40. Much of this is because of the price of admissions increasing, but in-park spending is also on the rise. This means the company has a great chance of continuing to grow its bottom line and keep investors happy.
Is SeaWorld Stock A Buy? The Bottom Line
SeaWorld is a long-standing American amusement park company. Its share price took a big dive when parks were closed by social distancing and travel restriction guidelines. This caused profits and revenues to plummet and the company continues to struggle to keep its head above water.
However, things are starting to look up. Most of its parks are reopened, and the company has plenty of new rides that can create buzz upon opening. These had been delayed but now offer a great pipeline moving forward.
Still, the company’s stock trades at lofty levels, and future upside in financials seem to be already baked into the SEAS share price. The biggest question on investors’ minds is whether it will reinstate its dividend payment.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.