On Thursday, Goldman Sachs (NYSE:GS) shifted its stance on United Parks & Resorts (NYSE:PRKS), downgrading the stock from "Buy" to "Neutral". The firm also revised the price target downward to $53 from the previous $63.
The reassessment follows the company's second quarter results for 2024, which saw the stock outperform due to an unexpectedly rapid share buyback initiative and slightly better-than-anticipated trends in July.
The downgrade was prompted by concerns regarding the company's performance in the second half of the year. The analyst cited skepticism about United Parks & Resorts' ability to meet its guidance for a record EBITDA in 2024.
The forecast suggests a shift from a 3% EBITDA decline in the second quarter to a 3% increase in the latter half of the year, coupled with expectations of growth in both attendance and per capita spending, despite a negative trend at the end of the second quarter.
The analyst pointed to three major risks that could affect the stock's performance: the uncertainty of meeting the 2024 EBITDA guidance, potential spillover effects from softness in the Orlando market as noted by competitors, and the implications of the upcoming Epic Universe park launch in 2025 on the company's long-term prospects.
Despite these concerns, the analyst acknowledged that the stock's valuation remains relatively low compared to its historical average. The continued share buyback program is expected to provide some level of support in the near term.
However, the firm believes the risks and potential rewards for investing in United Parks & Resorts are now more evenly balanced, given the possibility of deteriorating fundamentals.
In other recent news, United Parks & Resorts Inc. reported a slight rise in Q2 attendance with approximately 6.2 million guests, up from last year's 6.1 million.
The company's projected revenues for the quarter are estimated to be between $495 million and $500 million, aligning closely with the previous year's Q2 revenues.
The anticipated net income is expected to fall between $87 million and $95 million, comparable to the $87.1 million earned in Q2 of the previous year. However, a decrease in Adjusted EBITDA is expected, ranging from $215 million to $220 million, a drop from the $224.2 million reported in Q2 of 2023.
Truist Securities has raised its price target on United Parks & Resorts shares to $68.00, maintaining a Buy rating, based on the company's rising demand trends. B.Riley also raised its price target for the company's shares to $84, reiterating a Buy rating, in anticipation of the finalization of a merger between Cedar Fair (NYSE:FUN), L.P. and Six Flags (NYSE:SIX) Entertainment Corporation.
United Parks & Resorts' Q1 earnings for 2024 surpassed market expectations, leading to a revenue increase of $4 million and a $7 million growth in EBITDA. The company's shareholders recently elected a new board and ratified KPMG LLP as the independent auditor for the current fiscal year.
They also approved a $500 million share repurchase program, signaling confidence in the company's financial health. These are the recent developments surrounding United Parks & Resorts Inc.
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