Declining Demographics And Climate Volatility Will Depress Park Attendance

Key Takeaways

• Demographic shifts, rising climate risks, and digital entertainment trends are eroding long-term park attendance and revenue growth prospects.
  
• Increased sensitivity to pricing, regional concentration, and dependence on seasonal traffic heighten margin pressure and earnings volatility.
  
• Robust demand growth, digital initiatives, strong event sales, global expansion, and capital returns are positioning the company for enhanced recurring revenue and improved shareholder value.

Catalysts

Operates as a theme park and entertainment company in the United States.

• The company's ability to maintain historical attendance levels is increasingly threatened by shifting demographics, with aging populations and lower birth rates in key developed markets reducing the core family customer base and limiting long-term demand for theme park experiences, putting sustained revenue growth at risk.
  
• Intensifying climate volatility and the growing frequency of extreme weather events-already cited as significant recent headwinds-pose rising threats to park operations, potentially causing unplanned park closures, increased insurance and maintenance costs, and suppressed visitor numbers, all of which could weigh on both near
• and long-term earnings and margins.
  
• Despite management's emphasis on digital transformation and personalization, ongoing consumer migration to at-home digital entertainment such as streaming and immersive gaming options is likely to diminish the appeal and share of discretionary spending for physical park visits, creating a structural drag on visitation and in-park guest spending, which in turn will suppress top-line revenue growth.
  
• Admissions per capita and in-park per capita spending are already under pressure, with the most recent quarter showing declines of nearly four percent and flat to negative in-park spend, driven by rising value sensitivity and the need for promotional activity; these trends signal difficulty in maintaining pricing power and threaten future margin expansion.
  
• United Parks & Resorts' dependence on peak seasonal traffic and geographic concentration in a handful of U.S. markets heightens exposure to regional economic downturns, localized disasters, and intensifying competition from both traditional peers and alternative leisure options, increasing the likelihood of revenue volatility and undermining the predictability of long-term free cash flow.

United Parks & Resorts Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on United Parks & Resorts compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming United Parks & Resorts's revenue will grow by 1.5% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 12.4% today to 15.2% in 3 years time.
• The bearish analysts expect earnings to reach $270.3 million (and earnings per share of $5.0) by about August 2028, up from $211.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 10.2x on those 2028 earnings, down from 12.6x today. This future PE is lower than the current PE for the US Hospitality industry at 22.5x.
• Analysts expect the number of shares outstanding to decline by 5.11% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.89%, as per the Simply Wall St company report.

United Parks & Resorts Future Earnings Per Share Growth

Risks

• Forward booking trends for 2026 group business and Discovery Cove are showing mid
• to high single digit increases, along with early increases in 2026 pass sales, which indicate potential for higher future revenue and improved earnings as guest demand appears robust.
  
• The company is actively executing digital transformation initiatives-including the growth of its mobile app and CRM system-which are already driving 35 percent higher average food and beverage transaction value through the app, providing a foundation for higher per-capita in-park spending and stronger operating margins.
  
• Management highlights growing event demand with early ticket sales for major seasonal offerings like Halloween and Christmas running ahead of prior years, suggesting successful event-driven year-round park utilization and the ability to stabilize and grow recurring revenue even outside peak summer season.
  
• United Parks & Resorts is advancing IP partnerships and international expansion via two expected capital-light MOUs and further hotel development that can leverage its sizable land assets, broadening the company's revenue streams and supporting long-term topline and margin growth.
  
• A new $500 million share repurchase program is being undertaken on the back of significant free cash flow generation and a strong balance sheet-this capital return, combined with management's repeated assertion that shares are materially undervalued, may drive higher earnings per share and improve shareholder value over the long term.

Valuation

• The assumed bearish price target for United Parks & Resorts is $44.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of United Parks & Resorts's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $81.0, and the most bearish reporting a price target of just $44.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $1.8 billion, earnings will come to $270.3 million, and it would be trading on a PE ratio of 10.2x, assuming you use a discount rate of 10.9%.
  
• Given the current share price of $48.64, the bearish analyst price target of $44.0 is 10.5% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.