Shares of SeaWorld Entertainment (SEAS 0.52%) have fallen out of favor lately. The theme park operator's stock has surrendered more than 5% of its value since posting fourth-quarter results three months ago, even though the S&P 500 has moved slightly higher in that time.
Investors will be tested on Tuesday when SeaWorld Entertainment announces its first-quarter financials ahead of the market open. Analysts aren't holding out for much in what is typically a seasonally slow period for the industry. Wall Street pros are settling for $205.97 million in revenue for the quarter, 7% below where it was a year earlier. They also are bracing for a loss of $0.55 a share, in line with the $0.56-a-share deficit it posted last time around.
The timing of the Easter holiday will naturally weigh on the year-over-year comparisons. The tourist-magnetic Easter break that was celebrated in March last year took place in April this time around. Attendance trends have been generally sluggish, but not having Easter holiday during the first quarter will be a big factor for an industry where the first three months of the year are typically insignificant. SeaWorld generated just 16% of its revenue during the first quarter of 2016, and that was with the benefit of a March Easter. The first quarter accounted for 15% of the annual revenue in 2014, the last time that Easter took place in mid-April.
The steep loss isn't a major concern. SeaWorld has always posted a deficit during the first and fourth quarter when a few of its parks are closed and those that are open draw light crowds. SeaWorld historically more than makes up for the losses with fat profits during the seasonally potent summer travel season.
Coming up for air
The first quarter may be SeaWorld's slow season, but the controversial theme park operator hasn't been dog paddling through its business. China's Zhonghong Zhuoye Group acquired a 21% equity stake in SeaWorld in March, buying Blackstone's remaining stake with plans to push the concept into Asia. Last month, SeaWorld announced that it would be adding a record-breaking river rapids-style thrill ride to its most visited park next year.
Analysts are torn in sizing up SeaWorld's prospects for investors. Three Wall Street mavens initiated coverage of SeaWorld stock last month with varying perspectives. Michael Swartz at SunTrust is going with a buy rating and $22 price target, feeling that the out-of-favor company can return to peak EBITDA levels by 2019.
Steven Wieczynski at Stifel has a slightly more ambitious price goal of $23 to go with his buy rating. SeaWorld is in the process of trying to shake off protesters who have been effective in thwarting attendance growth by adding more rides and attractions that don't center around marine life in captivity.
Christopher Prykull at Goldman disagrees with Swartz and Wieczynski. He has a sell call on the stock and a $16 price target, concluding that the stock offers a weak risk/reward proposition for investors.
They can't all be right, and on Tuesday morning, at least one of them will be wrong -- for now.