SIX - Theme park stocks: SeaWorld Cedar Fair land Buy ratings at Goldman Sachs while Six Flags is a Sell

2023-05-31 08:19:48 ET

Goldman Sachs initiated coverage on the U.S. theme park operators on Wednesday just ahead of the key summer season.

The firm started off coverage on SeaWorld Entertainment ( SEAS ) with a Buy rating. Analyst Lizzie Dove said a key differentiator for SeaWorld is the high exposure to the Orlando market, where pricing power is expected to stay strong. She also pointed to other positive factors in play.

"We believe ongoing cost-cutting initiatives and growth opportunities from international licensing and domestic resort potential are both underappreciated by investors."

Dove said valuation on SEAS is at a historic low due to concerns about new competition in Orlando. With consensus revisions moving upwards and international licensing ventures generally ascribed a 1.5X to 2.0X premium by the market, Goldman Sachs believes investors have an attractive entry point on the theme park stock.

Goldman Sachs' price target on SEAS of $75 reps more than 30% upside for shares.

Cedar Fair ( FUN ) was also given a Buy rating by Goldman Sachs. The upside case on FUN was said to center on the well-invested park portfolio, stable management team and high-repeat customer base from season pass penetration- which all provide it with pricing power. A normalization of expense growth following above-average expense growth is also said to de-risk the setup into 2023. FUN was tagged with a price target of $50.

Meanwhile, Goldman Sachs' trip into the theme park sector led it to start off Six Flags Entertainment ( NYSE: SIX ) with a Sell rating and price target of $26. SIX.

"We believe greater uncertainty and execution risk amidst the n company’s turnaround strategy provides a tough setup, as management strives to right-size its re-balancing of pricing and attendance. Though ~40% attendance declines in ‘22 provide an easy comp, we believe consensus is still mis-modeling per cap growth in ‘23, as well as the ongoing investment necessary in advertising and new rides."

The current valuation on SIX is also skewed negative per the Goldman Sachs breakdown.

SeaWorld ( SEAS ) rose 0.48% in premarket trading on Wednesday and Cedar Fair ( FUN ) was up 0.15% , while Six Flags ( SIX ) shed 1.90% .

More on theme parks stocks:

• Six Flags Entertainment: Attendance Drop On Price Increases
• The Future Of Cedar Fair: Why Investors Should Look Beyond Short-Term Fears
• SeaWorld Confronts An Inflation Monster
• Seeking Alpha's Quant Ratings on leisure facilities stocks

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