Citi Downgrades SeaWorld Entertainment Following 20% Rally

Citi has downgraded SeaWorld Entertainment Inc (NYSE: SEAS) to Neutral from Buy, as it finds the risk-reward less compelling after the stock’s 20 percent recent rally after the company revealed better-than-expected attendance and improved synergy targets for 2017 and 2018 while announcing its third-quarter results.

Citi's Bull And Bear

Citi models $7 of possible downside (bear case) and $4 of upside (bull case). For 2018, the brokerage’s bull case suggests $7 of upside and the bear case suggests $7 of downside.

“[A]fter the recent appreciation in the equity value, the risk-reward looks balanced even if we roll forward to 2018,” analyst Jason Bazinet wrote in a note.

Earlier, SeaWorld’s shares plunged to $12 following competition from Universal, Blackfish and, most recently, lower Latin American attendance, resulting in lower EBITDA, equity value and a dividend cut. But, the stock rallied 20 percent after improved third-quarter performance.

Price Target And Upside Potential

Also, Bazinet raised his price target to $19 from $14, with the revised target represents a potential upside of 11.8 percent.

In September, Bazinet upgraded the stock to Buy from Neutral, with a $14 price target.

Shares of SeaWorld closed Friday’s trading at $17 and were down 2.47 percent in Monday's pre-market session, trading at $16.58.