Casinos & Hotels

Stifel Out With Top Gaming and Leisure Picks for 2019

Norwegian Cruise Line

This stock has sold off recently and is the top pick overall at Stifel. Norwegian Cruise Line Holdings Ltd. (NASDAQ: NCLH) is the world’s third-largest cruise company, and it owns and operates Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises.

The company acquired Prestige Cruise Holdings, the parent company for Oceania and Regent Seven Seas Cruises, in 2014 to diversify into the premium and luxury segments of the market and expand its global footprint. Today, Norwegian has 25 ships across all three brands and offers itineraries to more than 510 destinations.

Stifel noted this about the company:

We are establishing the company as our top overall idea for 2019 as we believe the current ~7x 20 estimated price to earnings multiple fails to reflect the company’s solid booked position for 2019, relative underexposure to the weakening European consumer, the recent removal of its IPO sponsor ownership overhang, a steadily improving balance sheet, and the potential for a dividend initiation later this year. Despite what the recent volatility in the share price might suggest, we are unable to identify anything in the company’s current operating trends or future demand indicators that suggests a recession is imminent.

The Stifel price target for the shares is $71, and the Wall Street consensus target is $64. Shares closed trading on Friday at $46.19.

SeaWorld Entertainment

While this company has changed the way it does shows, the parks remain a prime tourist attraction, and this is the top leisure pick at Stifel. SeaWorld Entertainment Inc. (NASDAQ: SEAS) is a leading theme park company that delivers family-oriented entertainment through a diversified array of offerings and a focus on animal interaction and education.

The company owns and operates 11 theme parks in the United States, which attract more than 20 million visitors annually. Key brands include SeaWorld (with parks in Florida, California and Texas), Busch Gardens (Florida and Virginia) and Sesame Place (Pennsylvania). Flanker brands include Discovery Cove (Florida), Aquatica (Florida, California and Texas), Adventure Island (Florida) and Water Country USA (Virginia).

The stock has been hit hard after a big 2018. Stifel team noted this:

Although we continue to like the setup in the shares for 2019, we fully acknowledge the setup today is a lot different than twelve months ago. With that said, we continue to see ample room for improvement in both revenues and margins that should accelerate the rate of EBITDA growth and, subsequently, trigger further expansion in the trading multiple.

Stifel has set its price objective at $37. The consensus target price is $29.75, and shares ended last week at $25.04.

Despite the tremors felt in the markets over the fourth quarter, and the jitters that remain in 2019, the economy remains solid, people are making more at their jobs and sentiment is still very positive. These four top picks are great additions to growth portfolios with a longer time horizon.

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