You may not view theme park stocks and amusement park operators as a hotbed for investors, but SeaWorld Entertainment (SEAS 0.45%) is doing right by its shareholders this year. The stock is trading nearly 10% higher in 2022, making it one of just two publicly traded park operators to be posting gains in a year when the general market and most of its peers are trading lower.
Where does the operator of its namesake marine life parks, the Busch Gardens chain, and other park concepts go from here? Let's dive into some of the reasons why the rally could just be getting started for SeaWorld Entertainment.
Image source: SeaWorld Entertainment.
1. A "woke" and popular Disney is good for SeaWorld
SeaWorld is no stranger to protesting activists. It's been an easy target since the 2013 Blackfish documentary attracted the attention of PETA and other animal rights activists over the treatment of killer whales in captivity. Walt Disney (DIS -0.45%) found itself facing theme park protestors from both sides of an equal rights hot topic last month. CEO Bob Chapek's initial refusal to condemn Florida's controversial "don't say gay" bill led to employee walkouts and social media bashings. When he finally spoke out against the bill at Disney's annual shareholder meeting it angered the other camp, including Florida's governor, who is hoping to repeal Disney World's special district designation by the middle of next year.
Taking a political stand can galvanize one side, but it can also alienate the other. As a theme park fan, I can assure you that Disney discussion boards have become testy and unpleasant in recent weeks. Is this an opportunity for Disney rivals to pick up some of the traffic from folks vowing to stop going to the world's most popular theme parks? SeaWorld Orlando is SeaWorld's most visited gated attraction, and it happens to be the closest major park to Disney World. The original SeaWorld park in San Diego is also a reasonable drive from Disneyland. It wouldn't be a surprise if SeaWorld announces next month -- when it reports its first-quarter results -- that annual pass sales are on the rise.
A bigger part of this story is that a woke Disney is also apparently not slowing down Disney's own turnstile clicks. Its theme parks continue to be crowded, and it has had to suspend some annual pass sales and require park reservations to keep crowd levels in check since its post-pandemic reopening. It has also followed its peers by charging a premium for access to expedited queues. The park reservations system is naturally not popular with theme park fans, and Disney has suggested that the requirement isn't going away anytime soon. With many people unable to get into Disney World or Disneyland, SeaWorld is more than happy for the incremental business.
2. SeaWorld can still go shopping
One of the bigger stories in the attractions market this year was SeaWorld Entertainment making a $3.4 billion offer that was ultimately rebuffed by Cedar Fair. The regional amusement park operator happens to be the other publicly traded park operator that is trading higher in 2022.
With SeaWorld's stock as ascending currency -- a 10-bagger since bottoming out 25 months ago -- you can be sure it will attract other potential buyout candidates. As long as SeaWorld can make smart and accretive deals it should be viewed favorably by the market.
3. It's an obvious reopening play
SeaWorld's most popular properties are in Central Florida, Southern California, and Texas, where year-round operations are possible. Theme parks and regional amusement parks are clear plays for a post-pandemic recovery. We're not out of the woods yet, but pent-up demand already has folks flocking to thrill-filled gated attractions in droves.
SeaWorld is already taking advantage of Disney's limited pass sales and strict park reservation system. It recently raised prices. It's in prime position to make the most of an industry shakeout if attractive clusters of parks become available. However, it's also doing just fine on its own right now.
SeaWorld reports on May 5, next week, and it should be another strong report. SeaWorld Entertainment may not be a leader among leisure stocks, but as a 10-bagger since the pandemic bottom in 2020 it's certainly making a splash with some investors.
