Wells Fargo Wants Off The Theme Park Ride, Downgrades SeaWorld And Six Flags

Weather has not been working in favor of U.S. thrillseekers: last quarter’s drizzly deterrents are behind two downgrades in Wells Fargo’s theme park portfolio.

The Rating

Analyst Timothy Conder downgraded SeaWorld Entertainment Inc SEAS and Six Flags Entertainment Corp SIX from Outperform to Market Perform with respective price targets of $22 and $74.

The Thesis

Wells Fargo’s rain and heat analysis for each major theme park region suggested that SeaWorld suffered the worst losses in the second quarter, while Six Flags was modestly impacted, Conder said in a Monday note. (See the analyst's track record here.)

The assessment is not insignificant. The quarter generally accounts for about 30 percent of the group’s annual revenues and adjusted earnings before interest, tax, depreciation and amortization — just behind the third quarter’s 43 percent of revenue and 62 percent of adjusted EBITDA, the analyst said. 

On top of the weather factor, Wells Fargo registered negative seasonal trading patterns and damaging forex headwinds for British and Brazilian patrons, the latter of which is seen only to affect SeaWorld.

Despite the downgrades, Conder said he expects SeaWorld to recognize material impact from its turnaround strategy this year, while Six Flags could see upside from five new parks acquired in June.

Price Action

At the time of publication, SeaWorld was set to open down around $21.85, while Six Flags was trading around $71.77.

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