A slump in air travel to the U.S. is emerging in the wake of President Donald Trump’s tariffs, and it could hit Walt Disney ‘s important theme park business where it hurts. With international guests accounting for about 20% of Disney’s park attendance in Orlando, Florida, and Anaheim, California, according to Barclays, the latest data on non-U.S. citizens traveling to America is troubling. Foreign arrivals year-over-year in March sank 9.6% to about 5.04 million, the International Trade Administration’s passenger monitor shows. Things don’t appear like they’re going to get better anytime soon. During Delta ‘s post-earnings call earlier this month, President Glenn Hauenstein said the airline expects upcoming June quarter revenue in a range of down 2% to up 2% year over year versus 3.3% growth in its just-reported March quarter. CEO Ed Bastian said that “consumers remain cautious” about economic uncertainty around global trade. Delta is planning on cutting capacity in the second half of 2025. The slowdown comes as Trump’s tariffs are stoking fears of a global trade war and deterring foreigners from visiting the U.S. Other countries, meanwhile, have also issued warnings not to travel to the U.S. due to the president’s anti-immigration and anti-transgender policies. Against that backdrop — and heightened concerns that tariffs could slow the global economy and tip the American economy into a recession — U.S. airport traffic overall was flat in March. That’s according to Transportation Security Administration (TSA) checkpoint passenger volumes . Goldman Sachs this week noted the worsening travel trends in February and into March and April after they got a post-election boost in December and January. An economic slowdown would also likely lead consumers to spend less or skip Disney vacations to theme parks altogether. In this scenario, a drop in theme park attendance often leads to a dip in the company’s operating income. Disney’s experiences unit — home to theme parks, cruises, and consumer product sales — has been a profit engine for the company, and it stood out again in fiscal 2025 first quarter results, which were reported in February. Due to its fiscal calendar, Disney’s first quarter ended on Dec. 31. The company reports its second quarter, ending in March, next month. Investors will be anxious to see whether those deteriorating travel trends start to show up in the company’s financials. Wolfe Research estimates Disney’s experiences business will deliver 6.4% operating income growth in fiscal 2025, below Disney’s guidance of 6% to 8%. In a Monday note, the analysts feel that recession risk is mostly priced into the stock despite experiences accounting for 60% of companywide operating income. Wolfe notes that Disney stock trades at a historically wide discount to the S & P 500 . The analysts, therefore, upgraded the stock to a buy-equivalent and a $112 per share price target, which implies more than 30% upside to Monday’s $84 close. In fiscal 2024, the division hit record revenue and profit . Revenue rose 5% for the full year to $34.15 billion — the strongest growth in any Disney division, representing about 35% of total revenue. Operating income increased 4% to $9.27 billion, accounting for 59% of the company’s total operating income. Those profits represent a much larger slice of the profit pie compared to the 28% of operating income from its entertainment unit — made up of streaming, television, and movies — and almost four times the 15% operating income from its sports segment, which includes ESPN and other sports streaming assets. DIS YTD mountain Disney YTD In addition to the difficult economic backdrop, another complicating element for Disney investors is the increased competition from Universal’s highly anticipated new theme park, Epic Universe, opening in May. The new attraction could mean market share loss for Disney in theme parks, threatening a key profit driver. NBCUniversal is owned by Comcast , which also owns CNBC. Jefferies analysts found that Universal Orlando web visits surged 52% year over year while web visits to Disney World were down 7%. The assessment on web visits, which analysts said are indicative of forward trends, suggests Epic will be a headwind to Disney’s summer attendance. This caused Jefferies to cut its price target on Disney stock to $87 per share from $100. Barclays, however, sees a bright spot in Disney’s experiences division that might offset some weakness: cruise ships. The analysts expect Disney’s cruise business to give a boost to profits, adding around 500 basis points, or 5 percentage points, to operating income in 2026, and about 2 percentage points each year after that, serving as a “significant growth driver for the segment as a whole.” Barclays concluded that despite the near-term risks in parks, the long-term visibility in the segment’s growth is where they find comfort. The cruise expansion is part of Disney’s multibillion-dollar bet on the experience segment’s long-term profitability. The company plans to nearly triple its cruise capacity by 2031, growing the ships from nine to 13 initially, with more ships on the way. As for Disney’s stock, it has been on a rollercoaster lately, driven by the shifting tariff headlines and the company’s reliance on international tourism. Shares surged nearly 12% on April 9 after Trump announced a 90-day pause on most “reciprocal tariffs” — excluding China — easing some economic fears. However, the optimism didn’t last as Disney stock declined in five out of the past seven trading days. During Monday’s Morning Meeting , Jim Cramer acknowledged that reduced travel could hurt Disney parks, which he called too expensive. However, we do see enough promise in the company overall — especially given its streaming profitability and improved comeback at the box office under CEO Bob Iger — to reiterate our buy-equivalent 1 rating and our $130 price target. At a more than 3% weighting in our portfolio, we feel like we own enough shares for now. Disney is set to deliver its latest quarterly earnings before the bell on May 7 — a progress report on Iger’s continued turnaround of the storied company. (Jim Cramer’s Charitable Trust is long DIS. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. 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Cars drive past a sign featuring Mickey Mouse at the entrance to Walt Disney World on the day that portions of the theme park, including the Magic Kingdom, reopened to guests after being closed since mid-March due the coronavirus pandemic.
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A slump in air travel to the U.S. is emerging in the wake of President Donald Trump’s tariffs, and it could hit Walt Disney‘s important theme park business where it hurts.
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