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Why Cedar Fair Shares Rose 10% in May

By Reuben Gregg Brewer – Jun 4, 2020 at 7:04AM

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Cedar Fair isn't anywhere near back to normal, but there's finally a light starting to shine at the end of the tunnel here.

What happened

Shares of amusement park owner Cedar Fair (FUN 2.14%) advanced around 10% in May, according to data from S&P Global Market Intelligence. Through the first five months of the year, The company's stock was still down by around 40%, but it's well off the lows it reached in mid-March when it was down around 75%. Like so many other companies, the story here is tied directly to the COVID-19 pandemic.

So what

Master limited partnership Cedar Fair operates amusement parks where people gather in large groups and do some excited yelling and screaming as they enjoy themselves on rides. That's exactly the type of environment in which the coronavirus could easily spread. It's also an entirely nonessential thing to do, resulting in Cedar Fair properties being asked to shut down along with many other businesses. As the government sought to slow the spread of COVID-19, Cedar Fair was idle. Thus, the deep price decline in March.

Two women in the front seat of a roller coaster

Image source: Getty Images

While fear ruled the day when the coronavirus first started to spread across the United States, those tensions are starting to ease. It appears that the government has at least slowed the spread of the virus. Non-essential businesses are starting to reopen. And there's been positive news on the development of a potential vaccine. All of these things have investors in a more upbeat mood about Cedar Fair's future. The amusement parks the company operates are putting new rules and operational policies into place to allow for reopening. Announcements regarding when the parks would reopen on a limited capacity basis are expected as early as next week.

Now what

Although the outlook is clearly getting brighter for amusement parks and Cedar Fair, long-term investors shouldn't get overly excited. Social distancing measures will likely keep attendance at the partnership's parks well below historical levels. In fact, it's probably best to consider the 2020 season a loss at this point. To put it another way, the headwinds here are far from over. 

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool recommends Cedar Fair. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Cedar Fair, L.P. Stock Quote
Cedar Fair, L.P.
FUN
$41.11 (2.14%) $0.86

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