Morgan Stanley is bullish on regional theme parks and thinks two names in individual are poised to outperform: Cedar Good and SeaWorld. The Wall Road business initiated protection of the shares on Thursday with over weight ratings. Its cost target of $53 for Cedar Truthful indicates just about 27% upside from Wednesday’s shut, even though its $70 value concentrate on for SeaWorld implies about 30% upside. “We feel US regional concept parks participate in a expanding field that added benefits from differentiated assets, high obstacles to entry (i.e., small competitive risks), pricing power, and opportunities for working leverage,” analyst Thomas Yeh wrote in a note to shoppers. Each Cedar Truthful and Sea World have underappreciated pricing electricity thanks to their desirable relative worth to other enjoyment alternatives and the loyalty of rising period move users, he claimed. The corporations have witnessed revenues raise 20% to 30% from 2019 to 2022, outpacing the advancement through this time in other customer-relevant sectors, he pointed out. That maximize in income came irrespective of attendance that isn’t really still thoroughly recovered to pre-pandemic stages. Entertaining YTD mountain Cedar Fair’s 12 months-to-date general performance Wage stress is also subsiding, which supports margin expansion, Yeh mentioned. And finally, regional theme park earnings before desire, taxes, depreciation, and amortization multiples are down 15% to 20% in comparison to pre-Covid ranges. In comparison, lodging multiples are down 5% to 10% and gaming/cruise multiples are up 5-10%, he stated. In certain, Cedar Fair has very well-invested attributes and a sturdy recurring customer foundation, which speaks to its fundamental pricing electrical power, Yeh wrote. “Margins have underperformed friends on elevated labor wages, but we see the possibility for much better functioning leverage ahead, as park revenues go on to scale and expense progress normalizes,” he claimed. SEAS YTD mountain SeaWorld’s 12 months-to-date efficiency An overlapping footprint with Disney and Universal and potential tailwinds from returning international visitation should push attendance and for every capita paying out growth for SeaWorld, Yeh stated. “Concentrated revenue footprint boosts scale prospects as running expense reduction initiatives carry on, whilst increased capex in ’23E could unlock extensive-expression progress possibilities,” he wrote. While there are fears about a potential recession, he thinks the regional topic parks can weather conditions a downturn. “Although not immune to broader financial cycles or a potential slowdown in shopper investing, the regional theme parks have shown resilience with a reasonably swift EBITDA restoration in previous cycles vs. other client subsectors and destination parks, benefiting from a regional shopper foundation and relative affordability,” Yeh explained. Cedar Fair is up just around 2% calendar year to date, when SeaWorld is small modified. — CNBC’s Michael Bloom contributed reporting.
