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Why SeaWorld Entertainment Stock Jumped Over 10% This Morning

By Reuben Gregg Brewer – Jul 1, 2020 at 12:10PM

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The amusement park operator still has a tough road ahead of it, but it could get easier if this good news is a harbinger of things to come.

What happened

Shares of water-themed amusement park operator SeaWorld Entertainment (SEAS -1.16%) jumped 10.5% out of the gate this morning. Peers Cedar Fair (FUN -1.43%) and Six Flags Entertainment (SIX -0.89%) also rose, but their advances only extended into the high single digits. That said, by 11 a.m. EDT, SeaWorld's price move had moderated, leaving it with an increase of around 7.5%. Cedar Fair and Six Flags were holding on to gains of about 5%.

So what

Amusement parks bring large crowds of people together on group-based rides where they shout and scream, zigging and zagging along their tracks. It's an environment in which COVID-19 could easily spread. Investors have understandable concerns about the amusement park business model right now, given that the world has yet to figure out a way to eradicate the novel coronavirus. 

Two women in the front seat of a roller coaster

Image source: Getty Images.

However, there was positive news today from Pfizer about progress on a potential vaccine. That comes on top of good news out of China and India on the vaccine front earlier in the week. Although China's injection has been approved for military use, the world is still a long way away from a widely available shot that has been proven safe and effective. Still, if one is found, then going to an amusement park becomes a whole lot less risky. So it's little wonder that shares of amusement park operators like SeaWorld rose on Pfizer's news.   

Now what

Long-term investors shouldn't take SeaWorld's gains today as anything more than an example of the ongoing volatility in an industry facing material operating headwinds. In fact, at this point, the key summer season is likely to be a complete wash. That's not good. SeaWorld, and its peers, will have to wait until at least 2021 before they can even hope to get back to a more normal operating environment. That seems like a long time for an investor to stick around.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool recommends Cedar Fair. The Motley Fool has a disclosure policy.

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