Image source: SeaWorld Entertainment.
Shares of SeaWorld Entertainment (SEAS 4.84%) keep hitting fresh near-term highs. Yesterday's close was the stock's highest since mid-June of last year, but there's more to SeaWorld stock than simply celebrating a nine-month high.
Sentiment has started to turn. The stock is up 19% in the past seven trading days, soaring since announcing an end to its active orca breeding program. The move will see an end to controversial killer whale shows in the coming years and an end to orcas in captivity as the last of the current generation die off naturally.
CEO Joel Manby has promised to shake things up since his arrival a year ago, and he has done exactly that. He seems to be just what SeaWorld needed, even if the stock has only moved 12% higher since he was introduced as the theme park operator's new chieftain last March.
Manby used to run the parent company behind family-friendly parks including Dollywood and Silver Dollar City. He was the subject of an Undercover Boss episode. He wrote a book called Love Works, urging executives to use love and other Christian principles as the basis for effective management. All of this may have made him an odd fit to lead the way at SeaWorld, but Manby at the helm has made it easier to address concerns that Blackfish-streaming activists have had with the theme park chain that emphasizes marine life.
He thought he finally had the critics figured out early on when he introduced the Blue World Project, an ambitious $300 million upgrade of the killer whale environments at its namesake parks. The new habitats would expand the tank size for the whales, but activists weren't satisfied with last summer's announcement. Manby thought the naysayers would be silenced in November when he said orca performances would end at its original park in San Diego come 2016, but that wasn't enough, either.
It remains to be seen if even this is enough, but with the Humane Society now on board and SeaWorld satisfying the California Coastal Commission request to end active breeding, activists will likely put down their picket signs at SeaWorld entrances and find new causes.
This leaves us with SeaWorld in the early stages of a turnaround. Attendance was flat last year after back-to-back years of 4% declines. Even in this depressed state, it's fairly undervalued. The company is trading at lower trailing revenue and EBITDA multiples than the country's two publicly traded regional amusement park operators, and its 4.1% yield puts to shame what the two entertainment conglomerates with heavy theme park interests are paying out.
The future will be even better. Orlando Business Journal ran a survey last week to see where readers thought SeaWorld should allocate the roughly $300 million it won't be needing for the Blue World Project expenditures now that the killer whales are on a ticking biological clock. The top choice was for SeaWorld to still allocate that money to expand the habitats throughout the park. Just 26% wanted that money to go for new rides, something that may actually be the smarter long-term response. Another 23% wanted to see SeaWorld invest that money at sibling parks Discovery Cove and Aquatica. SeaWorld can also choose to do nothing, padding its results in the near term.
SeaWorld is rolling now, but it's still far away from its IPO price of $27 back in 2013. With consumer and investor sentiment turning, a recovery from its days of being a broken IPO may finally be in reach.
