It is refreshing to read a positive outlook for SEAS. Investor, Alex Pitti provides a good amount of analysis for why the stock is a good buy.
Source: http://seekingalpha.com/article/3261235-seaworld-goes-on-stossel
SeaWorld Goes On Stossel
Jun. 16, 2015 5:34 AM ET
SeaWorld had a decent quarter as traffic actually increased by 5.6%.
The two roller coasters announced should improve traffic trends in Busch Gardens Tampa and SeaWorld Orlando.
I've been recommending SeaWorld (NYSE:SEAS) stock since January 2nd of this year. It continues to be one of my favorite stocks. I own the stock and plan on holding it for at least the next 12 months. My investment has taken me into the weeds as I have had to debate with environmentalists on Twitter (NYSE:TWTR) and in the comment section on Seeking Alpha. It definitely wasn't my plan when I originally wrote about the stock to have heated discussions about where the whales should live. That being said, I decided to combat the lies that some were spewing as it was necessary since this misinformation has caused sales to decline last year and investors to become squeamish. The stock has been a winner this year. The 4% dividend and the 14% increase in the stock since I originally recommended it should make any investor happy.
This article is going to discuss the recent events, which have occurred since I did my last article. These events are the latest quarterly earnings release, the announcement of two new roller coasters in Orlando, and the reporting on SeaWorld done by John Stossel on the Green Tyranny episode that aired on Fox News on Sunday, June 14th.
SeaWorld announced the building of Cobra's Curse in Busch Gardens Tampa Bay and Mako in SeaWorld Orlando, both of which will open in 2016. The Cobra's Curse ride is the first new Busch Gardens ride since Falcon's Fury opened in the fall of 2014. Falcon's Fury had a positive effect on traffic, so I expect this one to have a similar effect. The ride reaches top speeds of 40 mph. Its differentiating aspect is the cars spin in the middle of the ride making the passengers face each other. The video of a computer simulation of the ride has 64,000 views on YouTube, indicating significant interest from thrill seekers. It is the 8th coaster in the park.
The Mako roller coaster may confuse investors because the main selling point of the SeaWorld parks is the orca show. I believe this market positioning makes sense because if a family is deciding between which Orlando park to go to the park has something for everyone in the family from the animal lover to the roller coaster lover. The ride is being promoted as the tallest (200-foot) and fastest (73 mph) one in Orlando. The traffic trends should significantly improve because of this ride. The computer simulation video of the ride has 50,000 views on YouTube, which demonstrates a decent level of interest.
These rides will come during a 2016 season, which will feature the Reign of Kong ride at Universal. The company mentioned on the conference call the Orlando market's competitive dynamics will be difficult to overcome. Last year's problems were because of the Harry Potter ride, so this seems to be an ongoing challenge. The San Diego SeaWorld was negatively affected by the legislation, which aimed to remove the orcas from captivity. The legislation being tabled along with the brand image stabilizing marketing plan should provide an easier route to profitability growth than exists in the Orlando market. As an investor, I am looking forward to seeing how the new CEO presents his plans in the fall to combat the competition. Joel Manby mentioned his experience with running a company, Herschend, which wasn't the number one or number two player in the market, which is the same situation SeaWorld is in. Innovation will be important to maintaining market share. SeaWorld has the built in advantage of being highly differentiated from typical theme parks because of its orca exhibits.
Unfortunately, for SeaWorld, the 2017 competitive landscape in Orlando should be difficult because of the Skyscraper ride at the Skyplex. It will be the tallest (500 feet) roller coaster in the world, which will end Mako's one-year title as the tallest in Orlando. It only reaches top speeds of 65 mph, so Mako will still be the fastest. As you can see from the image below, the ride will be quite impressive. The structure will feature retail space and restaurant space with the entire Skyplex being 495,000 square feet. The website says social media views on the Skyplex have reached 300 million views. Originally, it was supposed to open in 2016, so the delay should allow SeaWorld to properly benefit from its new rides in 2016.
The greatest advantage SeaWorld has is easy comparisons as it laps the terrible 2014, which was negatively impacted by the Blackfish documentary. What determines whether I continue to hold this stock in the long term is what Joel Manby lays out in the fall.
My thesis on SeaWorld is best summed up by an interview on Fox News where John Stossel was promoting his show, which featured SeaWorld. He stated the company hadn't done a good job in response to the movie. He said things were changing now that they spoke with him. Quoting from the segment, Stossel said, "I think they're waking up now that they better start speaking to the media." The company should be in a good situation as the buzz from the movie dies down and SeaWorld's positive marketing campaign takes shape. In the 10-minute segment, John Stossel mentioned how most of what the Blackfish movie described was going on at SeaWorld was wrongly portrayed. Specifically, he mentioned the scene with the crying orca whale was faked. I am not making the case that this Stossel segment is going to cause a huge boost in traffic, but it could become significant if other conservative talk radio hosts join the cause. Stossel does have 250,000 Twitter followers, which is 5 times that of the Blackfish Twitter account, so he is popular. Fox News got 831,000 prime time viewers last Sunday, June 7th. This should be a good marker to go by because both last Sunday and the Sunday before it had to compete with an NBA Finals game. John Stossel also did a piece for Reason.com to illustrate his findings.
To get a picture of what conservatives can do when they organize, you can look at the Chick-fil-a Appreciation Day, which attempted to counter the boycott brought about by gay marriage advocates. The event, organized by Mike Huckabee, had 600,000 people on Facebook RSVP and caused the average sales for that day to spike by 29.9% for the average Chick-fil-a. It is unpredictable to determine whether this sort of situation will occur, but it has a better chance of happening now that John Stossel has brought light to the issue on his show. Being at the forefront of national political debate isn't an enviable position, but in this circumstance, SeaWorld has experienced all of the negative effects without anything positive. A more balanced scenario would be great for traffic.
The quarter was positive. Ultimately, this has little importance to the company's yearly earnings because it makes all of its profits in the summer months when all of the parks are open. The two most important numbers for SeaWorld are traffic and revenue per capita. The traffic was up 5.6% while revenue per capita decreased by 4.2%. One of the reasons for why revenue per capita was down was because of increase in pass sales. The passholders spend a similar amount on food, but tend to have lower spending on other items. This makes sense as a family who plans on visiting the park 5 times in a season wouldn't buy souvenirs during every trip to the park. Passholder trends are extremely important because these customers tend to visit the parks more often. A good analogy would be how Amazon Prime (NASDAQ:AMZN) customers tend to purchase more items.
The company described this phenomena on the call when it said "As you know better than anybody, passholders drive more total revenue per visitor but they spread that revenue over multiple visits and that results in a lower revenue per visit or lower per cap and we saw some of that in the first quarter. We expect to see some of that going forward, at least going into summer when the game changes and we become more dependent on our domestic and international tourist business. As far as forward-looking indicators, the best one I can point to is deferred revenue. When you get the K tomorrow, you'll see our deferred revenue was up 5% over the year ago period at the end of March and that's proven to be a fairly good forward-looking indicator." Clearly, passholder trends are giving us an early indicator of a slightly positive growth season.
The other reason for the negative revenue per capita number was promotional activity. The comps actually have been up by 12% in the last two Q1s so it was a difficult situation. The bottom really fell out in Q3 of last year, so that is where the comp numbers will get much easier. The company also mentioned the timing of Easter as a smaller factor causing increasing traffic. I ignore this factor because it isn't repeatable.
The stock action was neutral after the results, which is a big positive because the stock had a big run up from its all-time lows of $15. The stock has recently pulled back 8%, which is likely due to profit taking and the recent 2% sell off in the S&P 500.
I would describe the overall economy as neutral. Gas prices should provide a tailwind to consumer spending at the parks. The weakness in the Euro could cause a decline in travelers coming from Europe. This decline has been a problem for luxury retailers. I'd expect theme parks to have less of a negative impact, but it certainly is on my radar screen as something to watch out for.
In conclusion, my investment thesis for buying SeaWorld stock is it has easy comps and should see less of an impact from negative press which occurred last year when the legislation to free the whales at SeaWorld was discussed in California. I have done my research by talking with the head scientists at SeaWorld. From my own independent analysis, SeaWorld treats its whales perfectly fine and this negative press should blow over. As a forward-looking investor, I am focused on the long-term plans the company has to win in the perennially competitive Orlando market. The Blue World exhibit opening in 2018 in San Diego should improve traffic significantly, but I need to hear the new CEO's plans for how the company will compete in 2017 to determine when I will take profits in the stock.
Additional disclosure: Investors have copied my trade on Instavest.
Source: http://seekingalpha.com/article/3261235-seaworld-goes-on-stossel
SeaWorld Goes On Stossel
Jun. 16, 2015 5:34 AM ET
SeaWorld had a decent quarter as traffic actually increased by 5.6%.
The two roller coasters announced should improve traffic trends in Busch Gardens Tampa and SeaWorld Orlando.
I've been recommending SeaWorld (NYSE:SEAS) stock since January 2nd of this year. It continues to be one of my favorite stocks. I own the stock and plan on holding it for at least the next 12 months. My investment has taken me into the weeds as I have had to debate with environmentalists on Twitter (NYSE:TWTR) and in the comment section on Seeking Alpha. It definitely wasn't my plan when I originally wrote about the stock to have heated discussions about where the whales should live. That being said, I decided to combat the lies that some were spewing as it was necessary since this misinformation has caused sales to decline last year and investors to become squeamish. The stock has been a winner this year. The 4% dividend and the 14% increase in the stock since I originally recommended it should make any investor happy.
This article is going to discuss the recent events, which have occurred since I did my last article. These events are the latest quarterly earnings release, the announcement of two new roller coasters in Orlando, and the reporting on SeaWorld done by John Stossel on the Green Tyranny episode that aired on Fox News on Sunday, June 14th.
SeaWorld announced the building of Cobra's Curse in Busch Gardens Tampa Bay and Mako in SeaWorld Orlando, both of which will open in 2016. The Cobra's Curse ride is the first new Busch Gardens ride since Falcon's Fury opened in the fall of 2014. Falcon's Fury had a positive effect on traffic, so I expect this one to have a similar effect. The ride reaches top speeds of 40 mph. Its differentiating aspect is the cars spin in the middle of the ride making the passengers face each other. The video of a computer simulation of the ride has 64,000 views on YouTube, indicating significant interest from thrill seekers. It is the 8th coaster in the park.
The Mako roller coaster may confuse investors because the main selling point of the SeaWorld parks is the orca show. I believe this market positioning makes sense because if a family is deciding between which Orlando park to go to the park has something for everyone in the family from the animal lover to the roller coaster lover. The ride is being promoted as the tallest (200-foot) and fastest (73 mph) one in Orlando. The traffic trends should significantly improve because of this ride. The computer simulation video of the ride has 50,000 views on YouTube, which demonstrates a decent level of interest.
These rides will come during a 2016 season, which will feature the Reign of Kong ride at Universal. The company mentioned on the conference call the Orlando market's competitive dynamics will be difficult to overcome. Last year's problems were because of the Harry Potter ride, so this seems to be an ongoing challenge. The San Diego SeaWorld was negatively affected by the legislation, which aimed to remove the orcas from captivity. The legislation being tabled along with the brand image stabilizing marketing plan should provide an easier route to profitability growth than exists in the Orlando market. As an investor, I am looking forward to seeing how the new CEO presents his plans in the fall to combat the competition. Joel Manby mentioned his experience with running a company, Herschend, which wasn't the number one or number two player in the market, which is the same situation SeaWorld is in. Innovation will be important to maintaining market share. SeaWorld has the built in advantage of being highly differentiated from typical theme parks because of its orca exhibits.
Unfortunately, for SeaWorld, the 2017 competitive landscape in Orlando should be difficult because of the Skyscraper ride at the Skyplex. It will be the tallest (500 feet) roller coaster in the world, which will end Mako's one-year title as the tallest in Orlando. It only reaches top speeds of 65 mph, so Mako will still be the fastest. As you can see from the image below, the ride will be quite impressive. The structure will feature retail space and restaurant space with the entire Skyplex being 495,000 square feet. The website says social media views on the Skyplex have reached 300 million views. Originally, it was supposed to open in 2016, so the delay should allow SeaWorld to properly benefit from its new rides in 2016.
The greatest advantage SeaWorld has is easy comparisons as it laps the terrible 2014, which was negatively impacted by the Blackfish documentary. What determines whether I continue to hold this stock in the long term is what Joel Manby lays out in the fall.
My thesis on SeaWorld is best summed up by an interview on Fox News where John Stossel was promoting his show, which featured SeaWorld. He stated the company hadn't done a good job in response to the movie. He said things were changing now that they spoke with him. Quoting from the segment, Stossel said, "I think they're waking up now that they better start speaking to the media." The company should be in a good situation as the buzz from the movie dies down and SeaWorld's positive marketing campaign takes shape. In the 10-minute segment, John Stossel mentioned how most of what the Blackfish movie described was going on at SeaWorld was wrongly portrayed. Specifically, he mentioned the scene with the crying orca whale was faked. I am not making the case that this Stossel segment is going to cause a huge boost in traffic, but it could become significant if other conservative talk radio hosts join the cause. Stossel does have 250,000 Twitter followers, which is 5 times that of the Blackfish Twitter account, so he is popular. Fox News got 831,000 prime time viewers last Sunday, June 7th. This should be a good marker to go by because both last Sunday and the Sunday before it had to compete with an NBA Finals game. John Stossel also did a piece for Reason.com to illustrate his findings.
To get a picture of what conservatives can do when they organize, you can look at the Chick-fil-a Appreciation Day, which attempted to counter the boycott brought about by gay marriage advocates. The event, organized by Mike Huckabee, had 600,000 people on Facebook RSVP and caused the average sales for that day to spike by 29.9% for the average Chick-fil-a. It is unpredictable to determine whether this sort of situation will occur, but it has a better chance of happening now that John Stossel has brought light to the issue on his show. Being at the forefront of national political debate isn't an enviable position, but in this circumstance, SeaWorld has experienced all of the negative effects without anything positive. A more balanced scenario would be great for traffic.
The quarter was positive. Ultimately, this has little importance to the company's yearly earnings because it makes all of its profits in the summer months when all of the parks are open. The two most important numbers for SeaWorld are traffic and revenue per capita. The traffic was up 5.6% while revenue per capita decreased by 4.2%. One of the reasons for why revenue per capita was down was because of increase in pass sales. The passholders spend a similar amount on food, but tend to have lower spending on other items. This makes sense as a family who plans on visiting the park 5 times in a season wouldn't buy souvenirs during every trip to the park. Passholder trends are extremely important because these customers tend to visit the parks more often. A good analogy would be how Amazon Prime (NASDAQ:AMZN) customers tend to purchase more items.
The company described this phenomena on the call when it said "As you know better than anybody, passholders drive more total revenue per visitor but they spread that revenue over multiple visits and that results in a lower revenue per visit or lower per cap and we saw some of that in the first quarter. We expect to see some of that going forward, at least going into summer when the game changes and we become more dependent on our domestic and international tourist business. As far as forward-looking indicators, the best one I can point to is deferred revenue. When you get the K tomorrow, you'll see our deferred revenue was up 5% over the year ago period at the end of March and that's proven to be a fairly good forward-looking indicator." Clearly, passholder trends are giving us an early indicator of a slightly positive growth season.
The other reason for the negative revenue per capita number was promotional activity. The comps actually have been up by 12% in the last two Q1s so it was a difficult situation. The bottom really fell out in Q3 of last year, so that is where the comp numbers will get much easier. The company also mentioned the timing of Easter as a smaller factor causing increasing traffic. I ignore this factor because it isn't repeatable.
The stock action was neutral after the results, which is a big positive because the stock had a big run up from its all-time lows of $15. The stock has recently pulled back 8%, which is likely due to profit taking and the recent 2% sell off in the S&P 500.
I would describe the overall economy as neutral. Gas prices should provide a tailwind to consumer spending at the parks. The weakness in the Euro could cause a decline in travelers coming from Europe. This decline has been a problem for luxury retailers. I'd expect theme parks to have less of a negative impact, but it certainly is on my radar screen as something to watch out for.
In conclusion, my investment thesis for buying SeaWorld stock is it has easy comps and should see less of an impact from negative press which occurred last year when the legislation to free the whales at SeaWorld was discussed in California. I have done my research by talking with the head scientists at SeaWorld. From my own independent analysis, SeaWorld treats its whales perfectly fine and this negative press should blow over. As a forward-looking investor, I am focused on the long-term plans the company has to win in the perennially competitive Orlando market. The Blue World exhibit opening in 2018 in San Diego should improve traffic significantly, but I need to hear the new CEO's plans for how the company will compete in 2017 to determine when I will take profits in the stock.
Additional disclosure: Investors have copied my trade on Instavest.
