By Ian Salisbury

Theme park stocks have sold off hard this year. Investors may want to take them for a ride.

Things have been tough for travel and leisure stocks because the economy is weakening and consumer sentiment is persistently sour. Theme parks have been no exception. Shares of Six Flags Entertainment have tumbled 34% so far, while United Parks & Resorts, which owns SeaWorld and Busch Gardens, is down 26%.

Walt Disney, which gets the majority of its operating income from its theme-park and cruise-ship "Experiences" segment, is down about 22%. In February, Disney said the unit's operating income for its fiscal first quarter fell 5% from a year earlier because of bad weather and the cost of launching a new cruise ship.

Still, its outlook was more optimistic. Management forecast that operating income for Experiences would grow 6% to 8% for the full year.

While the weakening economy could certainly deal U.S. theme parks an earnings hit, the market is overreacting, at least when it comes to the pure-play stocks Six Flags and United Parks, according to a note Wednesday from Citi.

Citi lowered its forecasts of 2025 profits and target prices for both stocks, reflecting macroeconomic uncertainty. But its new target prices remain well above Six Flags' and United Parks' actual trading prices. Citi thinks Six Flags, currently trading at $28, can climb to $42. It pegs United Parks, now at $39, at $44.

A key reason for the optimism: While the Trump administration's on-again, off-again tariff drama has rocked the stock market, Six Flags' and United Resorts' largely domestic-focused destinations would be largely immune from a tariff war.

What is more, while a down economy might curtail American's spending on hot dogs and roller coasters, domestic amusement-park operators aren't likely to suffer as severely as operators of high-end or aspirational destinations. Local theme parks may even attract some "trade-down" dollars from vacationers who decide to skip more expensive alternatives, Citi argues.

That is a view shared by Truist analyst Michael Swartz. He cut his target prices for both stocks last month, while reiterating Buy ratings. He sees Six Flags trading at $52 and United Parks at $62.

The 2025 "selloff likely overstates [near-term] earnings risk as trade-down (i.e. closer-to-home) dynamic could favor local entertainment operators," he wrote.

Write to Ian Salisbury at ian.salisbury@barrons.com

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April 10, 2025 12:53 ET (16:53 GMT)

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