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The newly bolstered theme park operator Six Flags (FUN +3%), which completed its merger with Cedar Fair yesterday after the close, is continuing its upward momentum today. First announced in early November, the proposed ~$8 bln combination of the two dominant theme park operators across the United States (with a few in Mexico and Canada) triggered excitement among investors. Shares of FUN (formerly under the ticker "SIX") have soared by over +70% since the merger was announced.

Despite the unwavering buying interest over the past eight months, the newly combined company presents a compelling opportunity to unlock synergies -- Six Flags anticipated around $120 mln in cost savings and $80 mln in incremental EBITDA -- and maintain its current positive momentum.

• With all parks operating under one umbrella, FUN can spur traffic growth by offering season passes that can be used at all parks. Six Flags already boasted strong pass sales through April, with 2024 total pass sales ahead of 2023 by double-digits, with average prices also increasing yr/yr. Add-on sales of All Season Dining and All Season Flash passes have also been tracking ahead of last year. Offering customers even more parks and add-ons could bring a significant yr/yr boost for the 2025 season.
• By removing a competitor, FUN immediately bolsters its pricing power. While rivals still exist, including Walt Disney (DIS) and Universal Studios (CMCSA), Cedar Fair operated 13 parks across North America scattered from the West Coast to the East Coast, giving it a formidable presence. The addition of Cedar Fair's parks further diversifies FUN's revenue stream, placing less dependence on any one park or region and providing more stability.
• With how complementary the two companies' operations have been through the years, cost savings should be evident immediately. Two of FUN's current goals are to recapture attendance and aggressively seize cost savings opportunities to bolster its operating margins and return to pre-pandemic levels. With the one-two combo of pricing power and cost savings opportunities, FUN may be able to return margins into the low 40% range quicker than expected.

While we like the future of a combined Six Flags and Cedar Fair, there are still possible speed bumps down the road. The macroeconomic landscape has been stubbornly challenging. Outdoor lifestyle names from Vail Resorts (MTN), which caters to the skiing community, to camping stocks like Thor Industries (THO) and Winnebago (WGO), and pool suppliers Pool (POOL) and Latham Group (SWIM) have been facing unrelenting headwinds in the wake of elevated inflation and interest rates. FUN's near-term demand could begin enduring a sharp pullback for similar reasons.

Still, over a longer timeframe, FUN is positioned for success. The resilience of the travel industry despite macroeconomic obstacles underscores a deep desire from individuals to prioritize experiences. With such a fortified portfolio of parks across North America, FUN can continue to capitalize on this trend while beginning to unlock meaningful cost savings.