A slump in air travel to the U.S. is emerging within the wake of President Donald Trump’s tariffs, and it could hit Walt Disney ‘s vital theme park business where it hurts. With international guests accounting for about 20% of Disney’s park attendance in Orlando, Florida, and Anaheim, California, in accordance with Barclays, the most recent data on non-U.S. residents 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 seem like they’ll get well anytime soon. During Delta ‘s post-earnings call earlier this month, President Glenn Hauenstein said the airline expects upcoming June quarter revenue in a variety of down 2% to up 2% 12 months over 12 months 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 capability within the second half of 2025. The slowdown comes as Trump’s tariffs are stoking fears of a worldwide trade war and deterring foreigners from visiting the U.S. Other countries, meanwhile, have also issued warnings to not travel to the U.S. as a consequence of the president’s anti-immigration and anti-transgender policies. Against that backdrop — and heightened concerns that tariffs could slow the worldwide economy and tip the American economy right into a recession — U.S. airport traffic overall was flat in March. That is in accordance with 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. On this scenario, a drop in theme park attendance often results in a dip in the corporate’s operating income. Disney’s experiences unit — home to theme parks, cruises, and consumer product sales — has been a profit engine for the corporate, and it stood out again in fiscal 2025 first quarter results, which were reported in February. Resulting from its fiscal calendar, Disney’s first quarter ended on Dec. 31. The corporate reports its second quarter, ending in March, next month. Investors shall be anxious to see whether those deteriorating travel trends start to indicate up in the corporate’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 eight%. In a Monday note, the analysts feel that recession risk is generally 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, due to this fact, upgraded the stock to a buy-equivalent and a $112 per share price goal, which means greater than 30% upside to Monday’s $84 close. In fiscal 2024, the division hit record revenue and profit . Revenue rose 5% for the total 12 months 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 corporate’s total operating income. Those profits represent a much larger slice of the profit pie in comparison with the 28% of operating income from its entertainment unit — made up of streaming, television, and flicks — and almost 4 times the 15% operating income from its sports segment, which incorporates ESPN and other sports streaming assets. DIS YTD mountain Disney YTD Along with the difficult economic backdrop, one other complicating element for Disney investors is the increased competition from Universal’s highly anticipated latest theme park, Epic Universe, opening in May. The brand 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% 12 months over 12 months while web visits to Disney World were down 7%. The assessment on web visits, which analysts said are indicative of forward trends, suggests Epic shall be a headwind to Disney’s summer attendance. This caused Jefferies to chop its price goal on Disney stock to $87 per share from $100. Barclays, nevertheless, sees a shiny spot in Disney’s experiences division which may offset some weakness: cruise ships. The analysts expect Disney’s cruise business to fortify profits, adding around 500 basis points, or 5 percentage points, to operating income in 2026, and about 2 percentage points annually after that, serving as a “significant growth driver for the segment as an entire.” Barclays concluded that despite the near-term risks in parks, the long-term visibility within the segment’s growth is where they find comfort. The cruise expansion is an element of Disney’s multibillion-dollar bet on the experience segment’s long-term profitability. The corporate plans to almost triple its cruise capability by 2031, growing the ships from nine to 13 initially, with more ships on the best way. As for Disney’s stock, it has been on a rollercoaster currently, driven by the shifting tariff headlines and the corporate’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. Nevertheless, 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. Nevertheless, we do see enough promise in the corporate overall — especially given its streaming profitability and improved comeback on the box office under CEO Bob Iger — to reiterate our buy-equivalent 1 rating and our $130 price goal. At a greater than 3% weighting in our portfolio, we feel like we own enough shares for now. Disney is about 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’ll receive a trade alert before Jim makes a trade. 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Cars drive past an indication featuring Mickey Mouse at the doorway 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 within the wake of President Donald Trump’s tariffs, and it could hit Walt Disney‘s vital theme park business where it hurts.
