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Not amused

23 June 2021 By Lauren Silva Laughlin

What washes away the sting of a pandemic like dolphins jumping through hoops? SeaWorld Entertainment and other theme-park operators have seen a resurgence in attendees so keen for wholesome fun or a thrill ride they’re willing to pay full admission prices – and spending more when they get inside. With costs whittled down over the past year and a half, it’s a sweet spot to be in. But a slight bump to expectations could make stomachs drop.

While Covid-19 crimped visits to places like SeaWorld and Six Flags Entertainment, such destinations have come roaring back. In the first three months of the year, SeaWorld’s revenue jumped 12% compared with the first three months of 2020, when lockdowns had only just started. Compared to 2019, sales were only off by around a fifth.

More impressive is how the operator of parks in Orlando, San Antonio and San Diego is doing more with less. The average admission price per head, $43.25 in the first quarter, was some 12% higher than in 2019. In-park spending rose by a quarter from that time. At the same time, costs have been kept in check. The company’s net loss narrowed in the quarter ended in March compared to a year earlier.

Though not all competitors have managed the same feat, the sector’s valuations have improved from their pre-pandemic state. Knott’s Berry Farm parent Cedar Fair and Six Flags sport enterprise values that are higher than before Covid-19. SeaWorld’s enterprise value is a full 50% greater than it was in January 2020.

SeaWorld’s EV-to-estimated 2021 sales of more than 4 times, according to Refinitiv, is 70% more than it was in 2019. Assuming the multiple fell back to pre-pandemic levels, Six Flags’ revenue would need to increase from an estimated $1.3 billion to more than $2.4 billion to justify its roughly $6 billion total enterprise value.

Fun parks are in good company when it comes to high expectations – other travel and leisure-related stocks like American Airlines are worth more now than they were before the pandemic. Still, investors have some high expectations for purchases of shark photo frames and stuffed flamingos. Parkgoers may be having a moment, but investors could end up less amused.


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