Entertainment

Time to Buy These 2 Entertainment Stocks – March 7, 2023

With travel and leisure related demand expected to be higher in 2023, entertainment companies and theme parks will continue their post-pandemic recovery.

With the Leisure and Recreation Services Industry currently in the top 24% of over 250 Zacks Industries here are two stocks that investors should consider buying right now.

SeaWorld Entertainment (SEAS Free Report) )

Sporting a Zacks Rank #2 (Buy) SeaWorld Entertainment stock is starting to stand out as the owner and operator of the popular SeaWorld, Busch Gardens, and Sesame Place brands.

In correlation with the higher demand expected for leisure and recreation services, earnings estimate revisions are starting to go up for SeaWorld stock after the company beat its Q4 top and bottom-line expectations last Tuesday.

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SeaWorld earnings are now projected to climb 20% in fiscal 2023 and rise another 7% in FY24 at $5.32 per share. Sales are forecasted to be up 3% this year and rise another 2% in FY24 to $1.84 billion. More impressive, fiscal 2024 would represent 32% growth from pre-pandemic levels with 2019 sales at $1.39 billion.

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Year to date, SeaWorld stock is now up +19% to match the Leisure & Recreation Services Markets’ stellar performance and largely outperform the S&P 500’s +5%. Plus, SeaWorld’s valuation indicates its stellar performance in 2023 could continue.

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SeaWorld stock trades at $63 per share and 13.3X forward earnings which is nicely beneath its industry average of 23.2X and the S&P 500’s average of 18.2X. Plus, shares of SEAS still trade 83% below their decade high of 82.4X and at a 40% discount to the median of 22.1X. SeaWorld stock sports an overall “A” VGM Style Scores grade for the combination of Value, Growth, and Momentum.

Six Flags Entertainment (SIX Free Report) )  

Another Zacks Leisure and Recreation Services stock investors should consider is Six Flags Entertainment which currently sports a Zacks Rank #1 (Strong Buy). Six Flags stock also has an overall “A” VGM Style Scores grade and the earnings estimate revisions are very intriguing for the regional theme park operator.

Famous for its roller coaster rides, Six Flags theme parks also provide water attractions, concerts, shows, along with restaurants, game venues, and retail stores.

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Earnings estimates are already going up after Six Flags blasted its Q4 earnings expectations by 39% last Thursday despite a slight miss on its top line. Fiscal 2023 earnings are now expected to leap 27% this year and climb another 18% in FY24 at $2.42 per share.

Sales are projected to jump 8% in FY23 and rise another 5% in FY24 to $1.55 billion. More importantly, fiscal 2024 would be 5% above 2019 levels as Six Flags looks to continue its post-pandemic recovery.

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Six Flags stock is up +25% YTD to outperform the Leisure and Recreation Services Market and the benchmark. Furthermore, Six Flags P/E valuation also indicates this strong performance could continue.

Shares of SIX trade around $29 and 15.3X forward earnings which is beneath the industry average and the benchmark. Even better, Six Flags stock trades 87% below its decade-long high of 118.9X and at a 46% discount to the median of 28.3X.

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Takeaway

SeaWorld and Six Flags’ better than expected Q4 reports helped reaffirm that demand for entertainment among theme parks should continue to be higher. The rising earnings estimate revisions and attractive P/E valuations are reasons to believe that the rally in SeaWorld and Six Flags stocks could continue.

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