Shares of Casey's General Stores (NASDAQ:CASY) rose 7% on Wednesday, fueled by activist investors who are calling for the convenience-store operator to put itself up for sale and explore strategic alternatives. The stock has declined in back-to-back years as the general market and its industry leader has rallied, these investors argue that Casey's has been a disappointment.
The activists believe that Casey's has underperformed as a result of rapidly expanding form a presence in nine states to 15 in recent years. They point out that the chain has fallen short of Wall Street's profit targets for seven consecutive quarters, arguing that mismanagement has led to decelerating comps and bloated operating expenses. The investors collectively own just 1% of the company, but the stock's rally on the news suggests that the activists have a solid point. There's value in Casey's real estate. There's also upside in having new management potentially beef up store traffic and streamline its operations.
Casey's General Stores is moving higher because the market thinks it's a logical buyout candidate. But let's not stop there. There could be many buyouts this year, and it wouldn't surprise me if Pandora (NYSE:P)and SeaWorld Entertainment (NYSE:SEAS) join Casey's General Stores as acquisition candidates in 2018.
There's not a lot of love these days for streaming-music pioneer Pandora. Its user base is shrinking slowly, and it's struggling to turn free users into paying members. The stock hit all-time lows in November, after the company posted rough quarterly results. The reason Pandora makes this list is that it reportedly rebuffed a buyout offer two summers ago for three times what it's fetching now.
However, Pandora isn't a third of the company it was when the buyout chatter fizzled out in the summer of 2016. It had many of the same problems it has today, and it's not as if folks are abandoning Pandora's streaming platform in droves. It has shed just 10% of its audience since peaking more than three years ago. There are a lot of tech, telco, and music giants that would love to grab a hold of the 73.7 million active listeners on Pandora these days, and its ad rates and premium conversions are on the upswing.
It's not a surprise to see out-of-favor stocks dominating this list, and it's fair to say that SeaWorld Entertainment is the Charlie Brown of theme-park stocks. The operator of the Busch Gardens, SeaWorld, and Aquatica attractions is suffering from cascading revenue, earnings, and attendance.
Things haven't been easy for SeaWorld since it was skewered in 2013's Blackfish documentary, and moves to scale back on controversial orca shows have cut both ways, as activists are still angry and loyalists think it's selling out. This is the ideal climate for a takeover, and three months ago Bloomberg was reporting that an overseas theme-park operator was angling to acquire some of its healthier properties. A sale didn't materialize, but there are some logical suitors that could probably optimize the chain's performance and make nice with activists and existing passholders.
Rick Munarriz owns shares of Pandora Media and SeaWorld Entertainment. The Motley Fool owns shares of and recommends Casey's General Stores and Pandora Media. The Motley Fool recommends Yelp. The Motley Fool has a disclosure policy.