Credit Suisse Upgrades SeaWorld Entertainment (SEAS) to Neutral
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Credit Suisse upgraded SeaWorld Entertainment (NYSE: SEAS) from Underperform to Neutral with a price target of $12.00 (from $15.00).
Analyst Benjamin Chaike commented, "The risk/reward has changed since May, and we no longer see compelling downside from current levels. Expectations in our view have been properly reset, headwinds are priced in, and as such we are upgrading to Neutral. In May we had concerns about downside to guidance, downside to street estimates, risk of tripping debt covenants and likelihood of multiple compression, due to increasing competition, weaker than expected pricing power and a lack of cost savings. Since May SEAS is down ~35%, with mgmt. recently lowering its guidance range by $25m, coinciding with a 2Q16 earnings miss, and 1x TTM multiple compression. While we do not believe SEAS is in a better position structurally, we think mgmt. guidance, street expectations and valuation are now more appropriate, and mgmt. has alluded to the fact that capital allocation may be shifting towards more thrill based experiences. In addition to re-set expectations/guidance, our upgrade is predicated on the idea that SEAS will cut its current dividend (proactively) and reallocate that capital (~$80m/yr) back into a business drastically in need of differentiated content/experiences to drive attendance."
Shares of SeaWorld Entertainment closed at $13.13 yesterday.
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