SEAS - SeaWorld Entertainment: Exciting Projects Ahead

2023-11-29 04:54:52 ET

Summary

• SeaWorld Entertainment had a mixed year with lower total revenue but higher spending per customer.
• The company plans to implement new programs, build hotels, improve technology, and add new rides and attractions to drive revenue growth.
• SEAS faces challenges such as competition, animal care regulations, weather disruptions, and staffing issues.

Thesis

SeaWorld Entertainment ( SEAS ) has had a mixed year with lower total revenue but higher spending per customer. Nevertheless, exciting future projects make me believe they will have significant revenue growth again in the future. Overall, I am bullish on SeaWorld Entertainment.

Introduction

If you are not familiar with SeaWorld Entertainment, it is a company that runs big parks where people can see marine animals such as dolphins and whales. They have shown where these animals perform, and they also have rides and other attractions. The company has parks in different places in the U.S. They became famous for their shows with orcas (killer whales), but they also faced some problems when people started worrying about how these animals are treated. SeaWorld also helps sick or injured animals in the wild and teaches people about marine life.

Financial performance

Source: Seeking Alpha

SeaWorld Entertainment's financial performance in 2023 was marked by a few key trends:

According to the Q3 report . the company saw a downturn in attendance and revenue, mainly due to bad weather affecting their peak season. In Q3 2023, around 200,000 fewer guests visited, a 2.8% drop from the same period in 2022. This resulted in a 3% decrease in total revenue for the quarter, which amounted to $548.2 million. Net income also fell by 8.2% to $123.6 million

The report also notes that, across the first nine months, there was a 2.1% drop in attendance and a slight 0.2% decrease in total revenue to $1,337.6 million. The net income saw a more significant reduction of 19.8%, reaching $194.1 million. The COVID-19 pandemic, particularly the decline in international visitors, played a role in this performance.

Despite the overall revenue decline, SeaWorld achieved record in-park per capita spending, which increased by 1.6% to $34.85 in Q3 2023. However, admission per capita decreased by 1.6% to $42.05. For the first nine months, total revenue per capita increased by 1.9% to $80.36

These trends indicate that while fewer people visited SeaWorld's parks, those who did were spending more. The company's performance reflects the ongoing impact of external challenges like weather and the pandemic, while also highlighting its ability to drive revenue from visitors.

The future

But can they turn things around and recover from the revenue and profit drop? I looked into what exciting new projects SeaWorld Entertainment has to offer. I got these from their Q3 earnings call .

First, they're starting a new program for people who buy season passes. This means if you go to SeaWorld a lot, you'll get extra perks like discounts or maybe get to try new rides first. This is great for SeaWorld because it makes people want to visit more often and maybe spend more money when they're there.

Then, they're planning to build more hotels or make their current ones better. This is smart because people visiting SeaWorld might decide to stay in these hotels, which means more money for SeaWorld. Plus, if the hotels are really nice, people might come just for them.

They're also improving how they use the internet and technology. Things like a better website or a cool app can make it easier for people to buy tickets and find their way around the park. This can make the whole SeaWorld experience nicer and more fun, which means people might come back more often or tell their friends to visit too.

SeaWorld is also adding new rides and attractions. Everyone loves new and exciting things to do, so this can bring in more visitors, including families and thrill-seekers. More visitors mean more ticket sales, more food and souvenir purchases, and generally more money for SeaWorld.

Lastly, they're thinking of opening parks in other countries. This is a big deal because it lets them make money in new places and attract people who haven't been to SeaWorld before.

All these changes are about making SeaWorld a more interesting place to visit and getting more people to come, which is really good for their business.

Coming back to the previous section, I can see a change in direction coming for revenue. This catalyst could increase share price significantly in my opinion.

Challenges

SeaWorld's stepping into some exciting new ventures like opening hotels, spreading its wings globally, and sprucing up its online stuff. These are great ideas but they're pretty tricky to pull off. Setting up hotels is a whole different ball game than running theme parks. It needs a lot of cash and a whole new set of skills to look after guests. Going global means they've got to face off against big names who already know the turf inside out. Plus, making their online experience top-notch means keeping up with the latest tech trends and making sure they don't get hit by cyber-attacks.

On the animal front, SeaWorld's walking a tightrope. They've got to follow some really strict rules about how they take care of animals. If they mess up, it's not just about fines. They could lose the trust of their visitors, and that's a big deal. Also, there are groups out there who really don't like animals being kept in parks. They keep a close eye on SeaWorld and aren't shy about dragging them to court or making a big noise in the media if they think something's not right.

The weather can play havoc with their plans, too. Bad storms or super hot days can mean they have to shut down or hardly anyone shows up. And then there's the money stuff. If they can't find enough people to work, or if they have to pay more to keep their staff because everything's getting more expensive, their profits take a hit. Also, if things get tense in the world, like big political standoffs, it can scare off tourists, especially the ones coming from other countries.

In the theme park league, SeaWorld's up against some heavyweights like Disney and Universal. These guys are loaded and can spend big on new attractions, fancy tech, and getting the word out. SeaWorld needs to keep inventing new and exciting things and make sure visitors have an awesome time. They've got a unique angle with their focus on sea creatures, but they've got to make sure they hit the right note - fun, but also teaching people about looking after the ocean and the creatures in it.

In a nutshell, SeaWorld's got some ambitious plans and they're aiming high. But with that comes a bunch of challenges. They need to be smart with their cash, stay on the right side of the law and public opinion about animal care, deal with stuff like bad weather and finding enough staff, and keep up with the big names in the thrill-packed world of theme parks.

Conclusion

In conclusion, SeaWorld's got a lot on its plate, but it's pushing forward with some cool plans. They're thinking about ways to get people to come more often, like better deals for regular visitors and new stuff to see and do. They're also looking at building hotels and expanding into other countries, which could really pay off. But, it's not going to be easy. They have to manage their money well, make sure they're taking good care of the animals, and deal with things like bad weather and finding enough people to work for them. Plus, they're competing with some big theme park names. It's a big challenge, but if they can pull it off, it could mean a lot more people enjoying SeaWorld and a boost for their business. I trust the management and thus am bullish on the SeaWorld Entertainment stock.

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