Wondering what's sent Ardent Leisure Group's (ASX: AAD) share price over the cliff today?
While such questions are never easy to definitively answer given the many varied factors that can move a share price on any given day, Ardent Leisure's 5% fall from grace today is probably tied to the oil price.
Surprised? After all, Ardent Leisure is not an oil & gas producer but a theme park and leisure facilities operator. If anything, the fall in the oil price should theoretically be good news as it will put more money in the hands of Ardent Leisure's customers.
What's more the crash in fuel prices towards petrol parity of $1 a litre is expected to revive the long lost art of "road trips" in this country following a number of years of decline in the number of Australians getting into their cars to take a holiday.
This can only spell good news for Ardent Leisure with its Gold Coast based tourist attractions, like Dreamworld and White Water World.
However, investors have a preoccupation with bad news over good, and oil's failure to hold on to the previous day's gains has put the spotlight on Ardent Leisure's United States based family entertainment centres, called Main Event.
The group is expanding aggressively in the US and has a number of facilities in the oil producing state of Texas. The drop in the West Texas Intermediate (WTI) benchmark for crude to under $US47 a barrel has sparked worries that the Lone Star state could slip into a recession as some shale oil producers are forced out of business with the collapsing price of oil.
But people seem to forget that Main Event was started and thrived in the midst of the Global Financial Crisis (GFC). The business did well during that bleak period because it was a cheap way to keep the family entertained.
I am not saying the business is bulletproof but it's premature to think that a regional recession will automatically lead to a decline in growth of Main Event.
Even if we did see some weakness at Main Event, the fall in the Australian dollar and my expectations of a strong year for inbound and domestic tourism should help offset some of the earnings drag.
Ardent Leisure is 14 cents lighter at $2.65 ahead of the close of trade. The stock has lost 11% since the start of the calendar year.
