On Friday, Mizuho Securities adjusted its outlook for United Parks & Resorts (NYSE:PRKS), reducing the price target to $45 from the previous $46 while retaining an Outperform rating on the stock. The adjustment reflects a revision of the firm's financial estimates due to a perceived decline in park attendance.
The third-quarter revenue estimate has been modified to $536 million, down from the prior estimate of $555.7 million and below the street's expectation of $554.3 million. Similarly, the estimated EBITDA for the same period has been decreased to $259.9 million from the earlier forecast of $275.4 million and the street's projection of $269.7 million.
The analyst noted that third-quarter attendance is anticipated to drop by 2%, a shift from the previously expected 0.5% increase. The caution in extrapolating any weekly or monthly data points was expressed, especially as the stock faces a pivotal moment going into 2025 with what appears to be minimal top-line growth.
The analyst expressed difficulty in understanding the investment thesis for the stock given the increasing competition and the looming expiration of net operating loss (NOL) carryforwards in 2026.
Another significant factor for the third quarter is the behavior of cash costs. The second quarter saw higher costs on flat revenue, which is believed to have included some costs that were pulled forward. As a result, the third quarter's cash costs are assumed to be lower. In light of the lower projected EBITDA, the price target has been revised downward by $1.
The report also underscores the critical juncture the company is facing as it heads into the year 2025, with the market watching closely how United Parks & Resorts will navigate the challenges ahead, including the competitive landscape and financial variables that could impact its performance.
In other recent news, United Parks & Resorts has reported a series of significant developments. The company's revenue-based lease payments for its San Diego park saw a year-to-date growth of 2.9%, contributing to a 22.9% increase compared to the same period in 2019.
Despite challenging weather conditions affecting attendance and total revenues for the June quarter, improvements in July and August are expected to reinforce the strong demand for regional theme parks.
The company has also been proactive with its capital management, purchasing shares under a $500 million repurchase plan authorized earlier this year. In addition, United Parks & Resorts has expanded its credit facility from $390 million to $700 million, enhancing its financial flexibility.
B.Riley has maintained a positive stance on the company, reiterating a Buy rating and a price target of $71, while Goldman Sachs downgraded the company from "Buy" to "Neutral".
The company has also announced the appointment of Bill Myers as the new Chief Accounting Officer.
Attendance in the second quarter saw a slight rise to about 6.2 million guests, with projected revenues for the quarter estimated to be between $495 million and $500 million. These are the recent developments.
InvestingPro Insights
Recent InvestingPro data offers additional context to Mizuho Securities' analysis of United Parks & Resorts (NYSE:PRKS). The company's market capitalization stands at $3.02 billion, with a P/E ratio of 13.54, suggesting a relatively modest valuation compared to historical norms. This could be seen as aligned with Mizuho's cautious stance on the stock's near-term prospects.
InvestingPro Tips highlight that management has been aggressively buying back shares, which might indicate confidence in the company's value despite current challenges. However, it's noted that short-term obligations exceed liquid assets, potentially adding pressure to the company's financial flexibility as it navigates the anticipated decline in park attendance.
The revenue growth data from InvestingPro shows a slight decline of 0.74% over the last twelve months, corroborating Mizuho's concerns about minimal top-line growth. Nevertheless, the company maintains a strong gross profit margin of 51.24% and an operating income margin of 29.79%, which could provide some buffer against the projected attendance drop.
Investors seeking a more comprehensive analysis can find 7 additional InvestingPro Tips for PRKS, offering deeper insights into the company's financial health and market position.
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