Stocks That Won’t Exist in a Decade: SeaWorld (SEAS)
The Way Out: Bankruptcy OR Buyout
SeaWorld Entertainment Inc (NYSE:SEAS) simply hasn’t recovered from the bad publicity generated by the 2013 documentary Blackfish. SEAS stock hit an all-time low in late 2016, and though shares have recovered somewhat, they’re heading south again after a difficult year. Profit declined 8% last year, with attendance down 2.1%.
The problem for SeaWorld is that its fixed-cost base is incredibly high, which means lower attendance reads across to sharply lower profits. And with its leverage ratio nearing 5x, interest expense is a significant issue as well.
SeaWorld may have a savior: Chinese firm Zhonghong Zhuoye acquired a 21% stake in the company last March. And if the company can stabilize its business, larger theme park operators like Six Flags Entertainment Corp (NYSE:SIX) or Cedar Fair, L.P. (NYSE:FUN) could be interested.
That’s a big ‘if’ at the moment, however, and if SeaWorld can’t stop attendance declines, a sale could be forced upon the company. Either way, on its current trajectory, SeaWorld Entertainment is going to need cash from somewhere. That implies a likely sale – either before, or after, bankruptcy gets close.
As of this writing, Vince Martin did not hold a position in any of the aforementioned securities, but may take a long position in BREW stock this week.