Dip, Don’t Dive Into SeaWorld IPO: Pro
Several factors make SeaWorld's stock a "buy" into its IPO but not for the long-term, Sam Hamadeh of PrivCo said Thursday.
"There's not a direct apples-to-apples comparison because the big theme park companies that are comparable are really subsidiaries of either Disney or in the case of Universal, now a subsidiary of Comcast," he said. "The closest would be, like you said, Six Flags and Cedar Fair. Compared to them, the valuation is a little bit rich. You do have to adjust for the debt."
(Comcast is the parent company of NBCUniversal and CNBC.)
In its initial public offering, SeaWorld shares were priced at $27, giving the company a valuation of $2.5 billion. The offering consisted of 26 million shares for a total of $702 million.
On CNBC's "Fast Money," Hamadeh pointed out a couple of potential catalysts for the stock.
"There's a lot of retail investors who essentially want to buy a piece of Shamu for their kids, No. 1," he said. "No. 2, there's a lot of whispers that the next Sea World will be in China."
Hamadeh also noted that a lot of orders for the IPO were from high-net-worth investors from China.
(Read More: SeaWorld IPO Hopes to Make a Splash)
But major risks loom large.
Hamadeh pointed out that the company held $1.8 billion in debt. Also, the overhang from the Blackstone Group, which owns SeaWorld, represented approximately $2 billion in stock that it would have to sell over the next two to three years.
Hamadeh's recommendation: "Short-term buy, long-term avoid."
Trader disclosure: On April 18, 2013, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long AGU; Guy Adami is long MSFT; Guy Adami is long NUE; Guy Adami is long BTU; Tim Seymour is long AAPL; Tim Seymour is long BAC; Tim Seymour is long INTC; Tim Seymour is long SBUX; Tim Seymour is short FCX; Tim Seymour is long PEP; Jon Najarian is long GOOG CALLS; Jon Najarian is long CMG CALLS; Jon Najarian is long VXX CALLS; Jon Najarian is short GLD PUTS; Jon Najarian is long TXN PUTS.