SIX - Cedar Fair SeaWorld attract bullish initiation at Morgan Stanley

2023-04-20 13:18:32 ET

Morgan Stanley started coverage of multiple theme parks on Thursday, with an optimistic outlook on two in particular.

Equity analysts Thomas Yeh and Benjamin Swinburne selected Cedar Fair ( FUN ) and SeaWorld Entertainment ( NYSE: SEAS ) as new buy-rated names in the space, citing “an attractive risk/reward skew despite macro risks.” Yeh and Swinburne added that valuations at present are below pre-pandemic levels, minimizing downside risk.

“Our bullish industry view is based on unique brands, high barriers to entry, and complementary footprints, which create low competitive risks and EBITDA resilience given healthy underlying consumer demand,” the two explained. “Cedar ( FUN ) and SeaWorld ( SEAS ) have seen revenues increase 20-30% from 2019 to 2022. This has outpaced the improvement during this time at other consumer-related sectors, including US lodging RevPAR and US regional gaming GGRs, both up 5-10%.”

As such, the sector’s leaders are undervalued in their view. The team added that th revenue growth shows the pricing power that each theme park wields. Cedar Fair was assigned a $53 price target while SeaWorld ( SEAS ) was started at $70.

By contrast, unsuccessful price increases at Six Flags ( SIX ) and uncertain returns on

premiumization efforts “put long-term margin guidance at risk.” Yeh and Swinburne started Six Flags ( SIX ) at Equal Weight as a result.

Read more on Six Flags’ trouble with park attendance post-price increase .

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