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Bull Of The Day: SeaWorld (SEAS)

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SeaWorld SEAS, a leading aquatic-based theme park and entertainment company, is coming out of the pandemic downturn with a vengeance. SEAS has soared 850% out of the ashes of its pandemic lows and is now trading over 90% above its pre-pandemic levels with more room to run.

I originally pitched SEAS as my bull of the day in late August of last year when the stock was trading at less than $50 a share (over 40% returns since). Nevertheless, this stock’s recent ability to buck the broader market’s declines leads me to conclude that SEAS’s 25-month bullish uptrend is far from over as the US economy finally emerges from the medically induced recession mask-free.

SeaWorld proved its operational superiority in the amusement park space this past year, demonstrating an unparalleled return to profitability with record annual results as in 2021 (something no other travel & leisure business can claim).

The awe-inspiring rally SEAS exhibited from its pandemic lows can be attributed to the company’s savvy leadership team, led by Marc Swanson, who has captured more revenue (& market share) from excitement-seeking customers than any of its peers, and yet the stock still trades at a relative valuation discount.

Analysts have become more bullish on SEAS than I ever thought was possible, with many expecting its upcoming earnings report (May 5th) to be a catalyst for this leading travel & leisure stock’s ostensibly inhibited price.

Analysts have cited that consensus expectations for SeaWorld’s Q1 earnings underestimate foot traffic and in-park spending, which is driving aggressive upward EPS revisions, propelling SEAS into a Zacks #1 (Strong Buy).

The Blackfish Stigma

SeaWorld went public in April of 2013, just three months before the release of the critically acclaimed documentary, Blackfish, which was a black eye for the theme park's main attraction. The killer whale (aka orca) exhibit and the fantastic aquatic acrobatics demonstrated by both the brilliant whales and their trainers had viewers in awe and is what brought people to the amusement park until this whistle-blowing documentary shed light on the inhumane practices.

Blackfish revealed the controversy surrounding an orca named Tilikum who was involved in the death of three people and the consequences involved in keeping these kings of the ocean in captivity. The documentary focused on the ignored intellect of orcas and how the unnaturally confined aquariums in which they existed caused them anxiety and claustrophobia, leading to the devasting death of three trainers.

Despite the enormous controversy surrounding this documentary and the level of truth behind it, it still led to a steep decline in attendance across parks due to the reach that Blackfish was able to attain. This stigma plagued the theme park’s financials and stock price for nearly 5 years and even drove its CEO to step down.

From the movie's release in 2013 to November of 2017, SEAS lost over -70% of its value, but the business and its management team have made operational pivots that have swung this stock from a falling knife to a moon-targeting growth-focused rocketship.

The Comeback

SeaWorld stopped breeding orcas in 2016 and has been focusing on investing heavily in sentiment-reversing animal rescue along with other foot-traffic driving attractions across its 12 theme parks with 4 of the 9 most anticipated new 2022 rides opening from this enterprise’s rollercoaster pipeline (with its latest park, Sesame Place San Diego, opening in March). Management has proven an aptitude for high return investments as the entertainment enterprise disassociates its brand from the Blackfish taboo.

SEAS pre-pandemic performance reflected the company’s attendance inspiring new verticals, driving up its share price up over 250% from its lows in November of 2017 to its Feb 2020 high, compared to the S&P 500's only 32% increase over the same period.

The COVID lockdowns threw a wrench in its near-term operations like the rest of the amusement park space, but the speed at which SeaWorld has been able to bounce back is unmatched by both its direct competitors and the broader travel & leisure space.

SEAS is soaring out of this pandemic with more momentum behind it than any of its peers, taking market share on its way up. The company’s “re-opening” tailwind will continue to gain momentum through the summer months as society’s yearning to escape the confines of their homes and find an exciting escape drives demand for SeaWorld’s now best-in-class Park services (winning USA Today’s “Best” amusement park, water park, and rollercoaster of 2021).

Final Thoughts

Recent fears of an economic slowdown from the increasingly hawkish Fed positioning have hindered SEAS upside in the past couple of months. Still, SEAS has been one of the few US equities with a positive year-to-date return.

This stock’s unique buoyancy amid this market correction leads me to deduce that SEAS has some room to breakout in post-earnings price action next Thursday morning (5/5).

After an outstanding showing of astonishingly swift recovery this past quarter, analysts have been shooting up their 12-18 months price targets as high as $93 a share. I wouldn't hesitate to buy these shares at their current fear-induced discount.

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