Cedar Fair's Limited Near/ Medium-Term Catalysts Prompt Downgrade, 43% Price Target Cut By Credit Suisse

Credit Suisse analyst Benjamin Chaiken downgraded Cedar Fair L.P. FUN from Outperform to Neutral and lowered the price target from $74 to $42.
The analyst has downgraded Cedar as he thinks street numbers for FY23 imply somewhat aggressive growth assumptions in this environment, and as a result, he doesn’t see a catalyst path for any multiple expansions.
In his opinion, the company is more at risk of downward estimate revisions vs peers should the economy slow.
Operating expenses have trended above Chaiken’s expectations and above peers, making him cautious that Cedar Fair would be able to control costs should trends decelerate.
He said he is not bearish towards the theme park industry but simply hesitant in the current environment that the company can generate incremental topline growth in FY23 versus FY22, and translate that to EBITDA, relative to street expectations.
With similar attendance, similar number of parks, and similar top line versus peers, it’s not clear why Cedar has been subject to outsized operating expense inflation compared to FY19, the analyst added.
As a result, should fundamental trends decelerate, it’s unclear that the company would be able to reduce operation expenses, without seeing potentially significant margin compression.
Chaiken listed consumer health, weather patterns, competition, and COVID-19 as potential risks to Cedar’s performance.
Price Action: FUN shares are trading higher by 0.66% at $41.27 on the last check Monday.
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