By Davit Kirakosyan
With valuation well below pre-pandemic levels, Morgan Stanley (NYSE:MS) sees an attractive risk/reward for the regional theme parks (that offer double-digit levered FCF/share growth) despite macro risks, and initiated coverage on Cedar Fair (NYSE:FUN) with an Overweight rating and a price target of $53.00, SeaWorld Entertainment (NYSE:SEAS) with an Overweight rating and a price target of $70.00, and Six Flags Entertainment (NYSE:SIX) with an Equalweight rating and a price target of $29.00.
According to the firm, its bullish industry view is based on unique brands, high barriers to entry, and complementary footprints, which minimizes competition risks and creates EBITDA resilience given healthy consumer demand.
According to the firm, Cedar Fair’s strong season pass member visitation and greater margin opportunity from normalizing above-peer expense growth underpin its above-consensus 6% EBITDA CAGR through 2025.
On SeaWorld Entertainment, Morgan Stanley noted that overlapping footprint with Disney/Universal offers relative pricing power, with greater per-park scale supporting its above 5% EBITDA CAGR outlook.
According to the firm, recent strategic reset at Six Flags Entertainment creates both opportunity and risks, with upside potential from delivering a faster-than-expected recovery of lost attendance and revenues, while returns on premiumization efforts could take time and put long-term margin guidance at risk.