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Cedar Fair: So Much FUN At Cedar Fair, But You Can't Go

Jun. 08, 2020 1:28 AM ETCedar Fair, L.P. (FUN)15 Comments
Confoundedinterest profile picture


  • In March and early April the market was pricing FUN as if it were going bankrupt. In my mind bankruptcy is now off the table due to financing moves made.
  • The company has a remarkably recession resistant business which could thrive if air travel continues to be restricted and Americans are forced to stay regional for summer trips.
  • COVID-19 has provided the best possible reverse psychology trick imaginable for a successful re opening.

As you likely already know, Cedar Fair (NYSE:FUN) has been on a roller coaster of its own in the last few months, starting February in the mid $50's and cratering all the way down to $13 in mid March due to the COVID-19 pandemic and resulting lock downs only to rise from the ashes to its current $37 print as of 06/05/20

Stock Market Roller Coaster - TSPTiming

Source: Gary Varvel

In this article I would like to discuss the positioning of Cedar Fair in the leisure industry and the possible effect of the COVID-19 pandemic on future demand.

When COVID-19 first reared its ugly head in the USA during early March, I had the same reaction as most... Leisure companies such as airlines, cruise ships and amusement parks are done for a long, long time! But in late March I started to rethink this stance and refine my thoughts a bit...

1) Airlines- They are in for a world of hurt due to remote work, virtual meetings etc. Not to mention nobody likes being crammed in a tin can at 30,000 ft with 200 strangers to begin with so people will gladly avoid flying if at all feasible. In my opinion, these are un-investable.

2) Cruise Ships- Some will still go sure, but the majority of travelers are smack dab in the worst hit groups of the COVID pandemic of over 50 adults... Plus you are also packed in a metal petri-dish for weeks at a time and most require a flight to reach port... Hard pass.

3) Amusement Parks- If people are not flying and families are not cruising, is everyone just going to sit at home kicking cans around the yard all summer? No, people will choose regional (driving distance) travel with open air attractions. Amusement parks if allowed by local authorities to open could be a huge winner here. So I

This article was written by

Confoundedinterest profile picture
I work in the financial and property management industry for a well known, publicly traded "mini Berkshire" Insurance company. I focus on portfolio structure, value, reasonably priced growth, tech and biotech spaces. I passed the series 6 and 7 exams at age 18 but do not at this time have active licenses.My passion for investing and personal finance education began at a very early age. I opened my first brokerage account at the age of 12 and have invested through crashes, crises, recessions and bubbles. I have made many mistakes in both my personal and investing lives, however, each mistake I have made has taught me valuable lessons on my journey, both in life and towards financial independence. As of March 2023, my total portfolio has compounded at 10.2% per year since 1993, beating the S&P 500's return of 9.87% over the same time period. I do not currently hold active licenses and I am not a financial advisor and do not give out or publish investment advice. Articles I write are my opinion only and are not solicitations, please seek guidance from a licensed financial advisor before investing in any security. Opinions expressed in my articles are my own and do not reflect or indicate any positions or opinions held of my primary employer.

Analyst’s Disclosure: I am/we are long FUN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (15)

Tedamerica profile picture
For me it would be nice to invest in the top run theme park in America and yet it causes me problems with my sleeping. How long will the Chines Virus persist - We are re opening in many parts of America and the cases are spiking. My theory is the same thing will happen with amusement parks, even Disney. My idea is to keep your powder dry, dont worry about missing the "big move" and wait until there is more clarity - like when the virus is under control via a vaccine or cure.
Using numbers provided by Yahoo, I took 2019's financials to project 2020's. By closing May and June, and not being fully staffed, I assumed revenues would be 40% lower this year. By having COVID testing and addressing more-than-normal customer service relations, I assumed expenses would be 15% higher than 2019. I added in an extra $29 million in additional interest expense. I found that Cedar Point would be out of cash by the end of 2020. Please remember that all salaried employees were asked to take a 25% cut in pay. (They were promised to be reimbursed during the course of this year). While I'm not condemning Cedar Point for what they did, I am also assuming there were middle managers that left the company so they did not have to deal with the extra job responsibilities. 2021 short term probably won't look good either. As a years' long season pass holder, this year's pass is also good for next year. Cedar Point can't count on my money or any other season pass holder for 2021. Look for an equity raise?
Thank you for this article, Professor Lance. I had expected a June distribution of $0.292 - very close to your projection and the actual payment declared. But my expected total annualized yield is far below yours. I agree with your methodology - adding the projected distributions for the other two months in the quarter to the June payment,so I'm not sure why our projections are different. I may be being overly conservative, but... To the June payment, I add ~$0.03 for CODI (April) and ~$0.02 for ATAX (June). The resulting quarterly total is ~$0.34. I agree with you that FUN will likely not pay a distribution for some time now (pursuant to its debt covenant) and the distribution situation with respect to UAN is unclear: while the business outlook seems much improved, it chose not to pay a Q1 distribution. I hope for but do not count on distributions for Q2, Q3, and possibly Q4. With this perhaps overly conservative bent, I am looking for a yield of ~16% at the $8.24 indicative value. Did I miss something here?
Cedar Point opening info
No one on these forums fully understands how much of a competitive advantage $FUN has because of its management team. Zimmerman and Fisher are the best operators in the business.
What’s the value of their real estate holdings ?
brian65pls profile picture
In this environment how does a professional value real estate? It's really difficult; just ask REIT managers.
Limited crowds is a great sales point. I might even go. I had a small position and I always wanted more. So I bought more at 30 and then an equal amount at $16.
redsoxack2 profile picture
No mention of the fact they probably can’t let in more than 50% of usual attendance for the foreseeable future. I just don’t see how people can feel that they will have anything close to normal traffic at their parks for the next 12-24 months.
Confoundedinterest profile picture
Read again, it was covered twice... also these parks never hit 100% max “fire code” occupancy even on the busiest days so saying you can operate at 50% capacity every day is basically saying business as usual.
Crunching Numbers profile picture
@Confoundedinterest -

Read the comment of @richardsonbud20 more carefully. It states "...probably can’t let in more than 50% of usual attendance...", with the key words being "usual attendance" and not "theoretical attendance", and I'm fairly certain that's the correct way to look at this.

On a normal day lines are long and the rides that draw visitors to the parks are very long even with the rides packed to capacity. Maintaining social distancing in the lines and on the rides will present challenges that you haven't considered carefully.

This definitely won't be "business as usual."
brian65pls profile picture
This is very interesting. I would love to go to a park with limited attendance. It would be a different experience - I suspect much better for the attendee but not so much for the company (better than closed park).
I think FUN is.a bit ahead of itself at this point valuation wise. Pre COVID it was 55 dollars a share, but now you have debt, and the interest on that, what will likely be a mediocre park season, and a large amount of uncertainty about the economy still, along with a suspended dividend. How do we know if Cedar Fair will be able to get the employees it needs?

I like the company, but not a buyer at 37. I probably sell the July 30p and look to enter via a short put.

It will make it back to 55 by 2021 sometime, but in this market I have better ways to deploy capital for now. Not enough upside when I can pick the right name and rip off 20%+ gains. FUN just can't move like that anymore imo.
And yet, in the market we find ourselves, it could go higher. Reality may not set in until Sept-Oct.
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