NEW YORK (TheStreet) -- SeaWorld Entertainment (SEAS - Get Report) was downgraded to "underperform" from "neutral" at Bank of America/Merrill Lynch on Thursday morning. The firm cut its price target on the entertainment company's stock to $19 from $22.
The firm believes the company will need more time to turn its image around.
SeaWorld, known for its theme parks showcasing performing marine mammals, has come under fire over the last few years due to allegations the company mistreats the animals in its care.
Since the 2013 release of a critical documentary examining the psychological impact of holding intelligent animals in captivity, SeaWorld has been working to improve its public image and has begun initiatives to improve the animals' quality of life and bring guests back to its parks.
Earlier this week, SeaWorld announced it will end its current killer whale performances at its San Diego theme park. Beginning next year the park will phase out its theatrical "Shamu Show" in favor of a more "informative" experience.
Performances at the company's Florida and Texas parks will continue as they have been.
Shares of SeaWorld Entertainment closed at $18.08 on Wednesday afternoon.
Separately, TheStreet Ratings team rates SEAWORLD ENTERTAINMENT INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
We rate SEAWORLD ENTERTAINMENT INC (SEAS) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and expanding profit margins. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Hotels, Restaurants & Leisure industry average. The net income increased by 12.4% when compared to the same quarter one year prior, going from $87.18 million to $97.95 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 1.5%. Since the same quarter one year prior, revenues slightly increased by 0.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The gross profit margin for SEAWORLD ENTERTAINMENT INC is rather high; currently it is at 52.93%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 19.71% is above that of the industry average.
- SEAWORLD ENTERTAINMENT INC has improved earnings per share by 14.0% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. However, the consensus estimates suggest that there will be an upward trend in the coming year. During the past fiscal year, SEAWORLD ENTERTAINMENT INC reported lower earnings of $0.58 versus $0.59 in the prior year. This year, the market expects an improvement in earnings ($0.75 versus $0.58).
- In its most recent trading session, SEAS has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full analysis from the report here: SEAS