There’s no reason to chase these stocks on the way down, but keep an eye on park attendance
Investors expecting any relief from inflation will have to wait a little longer. The Consumer Price Index (CPI) showed inflation slightly lower on a year-over-year basis. However, by any metric, this was still a troubling report. And that means there will likely be more turbulence for equities.
However, we could all use a little more fun in our lives. And that’s why I’m inviting investors to take a look at Six Flags (NYSE: SIX) and Cedar Fair (NYSE: FUN) for their watchlists. It may not be time to buy, but over the next quarter or two, there may be an opportunity to find value in these stocks.
The Fundamentals Are Improving
Cedar Fair reported earnings in early May. I’m not concerned that the company posted negative earnings per share (EPS). The first quarter is historically one of the weakest quarters for both companies as many of their properties are not in operation.
It’s also not surprising that the company’s numbers were an improvement over the same quarter in 2021. Many of the company’s properties were still dealing with significant pandemic restrictions. But it might surprise investors to see that the numbers were significantly better than the number reported in 2020. That quarter, which ended March 31, 2020, was right before the onset of the pandemic.
Six Flags reports on May 12, I’m expecting to see a similar story from that stock. That suggests to me that Cedar Fair management may be correct when it suggests that park attendance will be on the rise this summer. And this is one instance where inflation may be a benefit. Allow me to give you my thesis.
A One Tank Trip For Consumers
I’m old enough to remember the oil shocks of the 1970s. I wasn’t old enough to be paying the price at the pump. However, I distinctly remember that the psychology of those shocks lingered for well over a decade. This was reflected in the concept of the “one tank trip.” That is, excursions that consumers could take without having to use more than a tank of gas.
Both Six Flags and Cedar Fair operate properties that many consumers can access with an easy day’s drive. And once they’re at the destination, in some cases such as at Cedar Fair’s Cedar Point property in Ohio, consumers can turn this into a multi-day vacation.
Simply put, both companies offer real value. And that’s something that consumers will be looking for even while they continue to look for experiences. For its part Cedar Fair has invested over $200 million in new rides and attractions to lure customers.
Watch Now, Buy Later
Strictly based on the Relative Strength Indicator (RSI), both SIX and FUN look oversold. However, if you look at the moving averages, neither stock has a great setup at this moment. That means, like a good roller coaster, you want to make sure you’re buying these stocks when they’re slowly climbing, not falling rapidly. The latter defines the market now.
Analysts are bullish on both stocks. In fact, since Cedar Fair reported earnings, the stock has received bullish price target upgrades. And both stocks currently are projected to have up to a 70% upside. To be fair, not all of the market repricing may be factored in.
However, by the time the companies report earnings in August, investors will have a better sense of attendance. If my hunch is correct, that may present a buying opportunity for investors. And at this point, either or both could be a buy. But for now, keep these on your watchlist and maybe go take a day to ride some real roller coasters and not the ones generated by the market.
Before you consider Cedar Fair, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Cedar Fair wasn't on the list.
While Cedar Fair currently has a "Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.
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