Stock Analysis & Ideas

3 “Strong Buy” Entertainment Stocks to Thrill Your Portfolio

As the final restrictions ease in the U.S. post-pandemic and travel picks up, people are turning towards live entertainment like concerts and plays or visiting theme parks to satiate their pent-up appetites. One indication of this has been the rising ticket prices for concerts and an uptick in visitors to theme parks.

When it comes to live concerts, a Wall Street Journal report from last week cited data from Live Nation Entertainment that stated ticket prices were up 11% in 2021 vis-à-vis 2019 and had increased by 14% in North America. What’s more, according to the report citing data from Live Nation, sales of concert tickets have risen 45% through mid-February versus 2019.

Considering this rising trend of live entertainment, Rosenblatt Securities analyst Barton Crockett has initiated coverage on three stocks in the live entertainment sector that other analysts on the Street are also bullish about.

Live Nation Entertainment (NYSE: LYV)

Live Nation Entertainment is a live entertainment company that connects around 310 million fans across its concerts and ticketing platforms in forty-five countries. The live entertainment company’s business segments include concerts, ticketing and sponsorship, and advertising.

Live Nation had stated in its Q4 press release that it remained bullish about 2022 as every lead indicator pointed to a year of strong growth. Elaborating further, LYV pointed out that as compared to 2019, its confirmed show count through February was up 30%.

Through mid-February, Live Nation had sold 45 million tickets, up 45% from the same period in 2019. The company added that not only the fans are growing but that it also expanded its portfolio of venues to 320 globally, adding 31 more venues in 2021.

Even the company’s sponsorship and advertising pipeline are up double digits through mid-February versus 2019, “with over 80% of our planned revenue for the year committed.”

While initiating coverage, analyst Crockett pointed out other key positives of the stock. This included a long-term growth expected to be in double digits and the possibility that even 2023 appears to be “robust.” The analyst pointed out that LYV had already 40 shows confirmed or in the pipeline for 2023.

As a result, while initiating a Buy on the stock, Crockett has a price target of $138, implying an upside potential of 25.8% to early morning trading levels on Tuesday.

Overall, other Wall Street analysts also side with Crockett and are bullish about the stock with a Strong Buy consensus rating based on eight Buys and one Hold. The average Live Nation stock forecast is $137, implying an upside potential of approximately 24.9% from levels seen before market open on Tuesday.

SeaWorld Entertainment (NYSE: SEAS)

SeaWorld Entertainment is a theme park and entertainment company with headquarters in Orlando, Florida. The entertainment company’s portfolio of brands that it owns or licenses include SeaWorld, Busch Gardens, Aquatica, Discovery Cove, and Sesame Place. It has developed twelve theme parks across the United States.

Shares of the company have fared well this year, up 12% year-to-date versus the S&P 500 which has been down 10.4% in the same time period.

According to Rosenblatt analyst Crockett, shares of SEAS have “more than tripled” since investor Scott Ross acquired a stake in the company through his firm Hill Path. The stake is now more than 35% of SeaWorld. At the time of acquiring the stake, according to the analyst, Hill Path believed that SEAS could be improved “with more effective pricing, better cost controls, and a brand pivot to animal rescues to defuse animal activism concerns.”

Crockett believes that these efforts are already paying off, even with COVID-19 headwinds. This was indicated by the company’s Q4 results that saw revenues soar 24% versus the same period in 2019 to $371 million. Adjusted EBITDA jumped 82% over Q4 of FY19 to $153 million.

According to the analyst, even at SeaWorld’s San Diego Park, where animal activists were protesting against extensive exposure of orcas, “Promotion of SeaWorld’s efforts to help rescue animals has helped defuse that, along with steps to lessen orca exposure by ending breeding, capturing, and dangerous in-pool trainer stunts.”

As a result, Crockett is bullish on the stock with a price target of $92, closer to the Street high target of $94. The analyst’s price target implies an upside potential of 23.6% to levels seen before market open on Tuesday.

Th rest of the analysts on the Street are also upbeat about the stock, resulting in a Strong Buy consensus rating based on seven Buys and two Holds. The average SEAS stock forecast is $83.75, implying an upside potential of approximately 12.5% from levels seen before market open on Tuesday.

Six Flags (NYSE: SIX)

Six Flags is another theme park and operator of water parks on this list that has 27 parks across the United States, Canada, and Mexico. The theme parks company has undergone some key management changes recently.

In February this year, SIX announced the departure of its EVP and CFO, Sandeep Reddy, effective March 27. After Reddy’s exit, the company stated that Stephen Purtell will be the interim CFO.

In November last year, Selim Bassoul was appointed CEO and President of Six Flags. Earlier, Bassoul was the Non-Executive Chairman of the Board.

Bassoul is pursuing a strategy of “premiumization” for the company. As Sandeep Reddy stated on SIX’s Q4 earnings call, “…we expect the premiumization strategy to depend less on total attendance and more on total revenue and profit as we focus on more premium guest[s].”

According to analyst Crockett, Bassoul believes that guests would be willing to pay more “for fewer crowds and a better experience.”

As a result, the analyst stated that SIX has introduced new, simplified, and more expensive pricing tiers, investing more in its parks, and is placing an emphasis on “better food, more cleanliness, shorter/faster lines, and better apps and other tech, versus new thrill rides that have historically driven 60% of investment.”

These initiatives are paying off for Six Flags as in FY21, total guest spending per capita was up 24% from FY19 and this spending was up 32% in the fourth quarter versus Q4 of FY19.

As a result, Crockett is optimistic about the stock with a Buy rating and a price target of $56, implying an upside potential of 34.2% to current levels.

Other Wall Street analysts are also optimistic about the stock with a Strong Buy consensus rating based on nine unanimous Buys. The average SIX stock forecast is $56.63, implying an upside potential of approximately 35.7% from levels seen before market open on Tuesday.

Bottom Line

From this list, it is evident that as restrictions on movement and travel ease, entertainment, especially live entertainment could see an uptick, and these stocks could stand to benefit.

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