An Unlikely Candidate For Goldman's 'Conviction Buy' List: Cedar Fair

Goldman Sachs analyst Christopher Prykull sees several positive catalysts for Cedar Fair, L.P. FUN, causing him to add the entertainment company to Americas Conviction List. Prykull is eyeing a 15-percent return and left his 12-month price target at $81.

“We believe FUN is uniquely positioned to benefit from a favorable leisure backdrop into the summer. Specifically, FUN’s early season indicators appeared strong as of April and multiple management teams noted ongoing leisure strength at our Lodging, Gaming, Restaurant, and Leisure Conference in early June, both of which give us incremental confidence in our above consensus (FactSet) estimates,” Prykull said.

Strong Early Season Demand Could Be Early Indicator Of Success

Notable Numbers From April:

What Investors Need To Know

• Season Pass Revenue: Up 10 percent.
• Deferred Revenue: Up 10 percent.
• Dining: Double Digit Growth.
• Per Capita Growth: Positive

• As Cedar Fair renovates its water parks in both California and Ohio, this should provide further room for upside in park attendance and season pass penetration. “Management teams at both SIX and FUN have seen a correlation historically between combo season pass sales and water parks,” said Prykull.
• At its latest earnings call, management stated the new sports complex at Cedar Point was running ahead of schedule. According to Prykull, “The addition of an indoor facility would be a benefit for FUN by driving year round hotel occupancy as well as event fees. We also believe FUN can add similar sports complexes at other parks over time, and expect announcements to come later this year or next year.”
• Favorable industry trends and industry strength this season have been noted by several of Cedar Fair’s competitors including Six Flags Entertainment Corp SIX, Carnival Corp CCL and Norwegian Cruise Line Holdings Ltd NCLH.
• An increase in events could lead to more operating days and additional season pass sales.
• Other positive catalysts include: The potential capitalize on undeveloped land, favorable weather trends and opportunities to increase season pass sales.

Overall, Goldman does not expect a major roller-coaster ride for Cedar Fair shares. The firm maintains its Buy rating on Cedar Fair, while adding it to its Americas Conviction List.