United Parks & Resorts (PRKS) presents a compelling, albeit complex, investment opportunity within the global leisure market. While facing historical profitability challenges and a substantial debt burden, PRKS exhibits resilient in-park spending, operational efficiencies, and a unique market positioning. This analysis suggests a **Hold** rating with a **12-month target price of $38**, representing the midpoint of a conservative valuation range based on a blend of discounted cash flow (DCF) and peer comparables analysis.
Industry Overview
The global leisure market, estimated at $1.52 trillion in 2023, is projected to reach $2.53 trillion by 2028, exhibiting a robust compound annual growth rate (CAGR) of 10.7%.1 Within this expansive market, the theme park segment faces unique dynamics, including increasing demand for experiential entertainment, evolving consumer preferences, and heightened competition. PRKS operates within a niche segment of this market, specializing in marine-life experiences and animal exhibits, which partially insulates it from direct competition with larger, diversified entertainment conglomerates.
Company Analysis
PRKS operates twelve parks across North America under the SeaWorld, Busch Gardens, and Aquatica brands.2 The company’s revenue streams primarily comprise admission fees (46% of trailing twelve months (TTM) revenue) and in-park spending (47% of TTM revenue).3 This dual revenue model offers a degree of stability, with in-park spending demonstrating resilience even during periods of attendance fluctuations.
A key challenge for PRKS remains its significant debt load, with a debt-to-equity ratio of -468.6%.3 This high leverage limits financial flexibility and increases vulnerability to macroeconomic headwinds. However, recent financial performance indicates improving operational efficiency, with a TTM gross margin of 50.3%.3 This suggests that PRKS may be on a path towards improved profitability, though sustained execution is crucial.
Investment Thesis
The core investment thesis for PRKS rests on the following pillars:
- Niche Market Differentiation: PRKS’s focus on marine-life experiences and animal exhibits provides a distinct offering within the theme park landscape, attracting a loyal customer base and mitigating direct competition with larger, more broadly themed parks.
- Resilient In-Park Spending: Demonstrated growth in per-capita spending, reaching $38.58 in Q1 2025, indicates strong pricing power and consistent demand for in-park offerings.4 This resilience offers a buffer against attendance fluctuations.
- Operational Efficiency Improvements: Expanding gross margins suggest improved cost control and operational discipline, which, if sustained, can contribute to improved profitability and deleveraging.
These factors position PRKS for potential long-term value creation, despite the current debt burden. The company’s focus on enhancing guest experiences through new attractions and targeted pricing strategies further supports the potential for future growth.
Valuation & Forecasts
We employed a discounted cash flow (DCF) model and comparable company analysis to arrive at our target price. Key assumptions for the DCF model include a conservative revenue growth rate of 2% over the next five years, gradually expanding EBITDA margins, and a discount rate of 12%, reflecting the company’s risk profile.
| Metric | 2025E | 2026E | 2027E |
|---|---|---|---|
| Revenue ($M) | 1,750 | 1,785 | 1,821 |
| EBITDA ($M) | 300 | 315 | 330 |
Our comparable company analysis considered regional theme park operators, applying a blended multiple approach based on EV/EBITDA and P/E ratios. The resulting valuation range, combined with the DCF analysis, supports our 12-month target price of $38.
Risks
Significant risks to the investment thesis include:
- High Leverage: The substantial debt burden limits financial flexibility and amplifies the impact of any operational setbacks.
- Attendance Volatility: Fluctuations in attendance, driven by factors such as economic downturns, weather events, or negative publicity, can significantly impact revenue and profitability.
- Competitive Pressures: Competition from larger, more established theme park operators, as well as alternative entertainment options, presents a constant challenge.
Careful monitoring of attendance trends, debt management strategies, and competitive dynamics is crucial for managing these risks.
Recommendation
While PRKS faces significant challenges, its niche market position, resilient in-park spending, and improving operational efficiency create a compelling long-term investment case. The current valuation appears to reflect the company’s risks, offering potential upside for patient investors. Therefore, we maintain a **Hold** rating with a 12-month target price of $38. Continued execution on operational improvements and successful navigation of the competitive landscape are key to realizing the company’s long-term potential.
1 Global Leisure Market Report 2023
2 SeaWorld Entertainment – About Us
3 Simply Wall St – United Parks & Resorts
4 United Parks & Resorts, Inc. Reports First Quarter 2025 Results
